Chance or Chaos? Fractal geometry aimed to inspect the nature of Bitcoin

TL;DR

This paper uses fractal geometry to analyze Bitcoin and other cryptocurrencies, revealing high price persistence and the influence of technology on their market dynamics, with decentralized coins showing self-similarity.

Contribution

It introduces a fractal analysis approach to compare Bitcoin with traditional assets and other cryptocurrencies, highlighting technology's role in price behavior.

Findings

Bitcoin shows high price persistence and decreased efficiency.

Decentralized cryptocurrencies exhibit self-similarity across time scales.

Price dynamics are influenced by underlying technology.

Abstract

The aim of this paper is to analyse the Bitcoin in order to shed some light on its nature and behaviour. We select 9 cryptocurrencies that account for almost 75\% of total market capitalisation and compare their evolution with that of a wide variety of traditional assets: commodities with spot and futures contracts, treasury bonds, stock indices, growth and value stocks. Fractal geometry will be applied to carry out a careful statistical analysis of the performance of the Bitcoin returns. As a main conclusion, we have detected a high degree of persistence in its prices, which decreases the efficiency but increases its predictability. Moreover, we observe that the underlying technology influences price dynamics, with fully decentralised cryptocurrencies being the only ones to exhibit self-similarity features at any time scale.