Wikipedia and Digital Currencies: Interplay Between Collective Attention and Market Performance

The production and consumption of information about Bitcoin and other digital-, or 'crypto'-, currencies have grown together with their market capitalisation. However, a systematic investigation of the relationship between online attention and market dynamics, across multiple digital currencies, is still lacking. Here, we quantify the interplay between the attention towards digital currencies in Wikipedia and their market performance. We consider the entire edit history of currency-related pages, and their view history from July 2015. First, we quantify the evolution of the cryptocurrency presence in Wikipedia by analysing the editorial activity and the network of co-edited pages. We find that a small community of tightly connected editors is responsible for most of the production of information about cryptocurrencies in Wikipedia. Then, we show that a simple trading strategy informed by Wikipedia views performs better, in terms of returns on investment, than classic baseline strategies for most of the covered period. Our results contribute to the recent literature on the interplay between online information and investment markets, and we anticipate it will be of interest for researchers as well as investors

Analysis of cryptocurrency markets from 2016 to 2019

This thesis explores machine learning techniques in algorithmic trading. We implement a trading computer program that balances a portfolio of cryptocurrencies. We try to outperform an equally weighted strategy. As our machine learning technique, we use deep reinforcement learning. Cryptocurrencies are digital mediums of exchange that use cryptography to secure transactions. The most well-known example is Bitcoin. They are interesting to analyze due to high volatility and lack of previous research. The availability of data is also exceptional. We introduce an algorithmic trading agent – a computer program powered by machine learning. The agent follows some pre-determined instructions and executes market orders. Traditionally a human trader determines these instructions by using some technical indicators. We instead give the trading agent raw price data as input and let it figure out its instructions. The agent uses machine learning to figure out the trading rules. We evaluate the performance of the agent in seven different backtest stories. Each backtest story reflects some unique and remarkable period in cryptocurrency history. One backtest period was from December 2017 when Bitcoin reached its all-time high price. Another one is from April 2017 when Bitcoin almost lost its place as the most valued cryptocurrency. The stories show the market conditions where the agent excels and reveals its risks. The algorithmic trading agent has two goals. First, it chooses initial weights, and then it rebalances these weights periodically. Choosing proper initial weights is crucial since transaction costs make trade action costly. We evaluate the trading agent’s performance in these two tasks by using two agents: a static and a dynamic agent. The static agent only does the weight initialization and does not rebalance. The dynamic agent also rebalances. We find that the agent does a poor job in choosing initial weights. We also want to find out the optimal time-period for rebalancing for the dynamic agent. Therefore, we compare rebalancing periods from 15 minutes to 1 day. To make our results robust, we ran over a thousand simulations. We found that 15 – 30 minutes rebalancing periods tend to work the best. We find that the algorithmic trading agent closely follows an equally weighted strategy. This finding suggests that the agent is unavailable to decipher meaningful signals from the noisy price data. The machine learning approach does not provide an advantage over equally weighted strategy. Nevertheless, the trading agent excels in volatile and mean reverting market conditions. On these periods, the dynamic agent has lower volatility and a higher Sharpe ratio. However, it has a dangerous tendency of following the looser. Our results contribute to the field of algorithmic finance. We show that frequent rebalancing is a useful tool in the risk management of highly volatile asset classes. Further investigation is required to extend these findings beyond cryptocurrencies

Trend-­following strategies for cryptocurrencies with machine learning

Cryptocurrencies could bring big returns, but they also carry high volatility and big crash sizes. I discovered that trend­following strategies help investors to mitigate cryptocurrency’s risk. I also tested and confirmed that risk managed momentum strategy is applicable to the cryptocurr ency environment and that machine learning implementation further improves volatility reduction.Cryptomoedas poderão levar a retornos elevados, contudo também podem estar expostos a maior volatilidade e quedas excessivas do mercado. Eu descobri que estratégias que seguem tendências ajudam investidores a reduzir o risco das cryptomoedas. Também testei e confirmei que estratégias que gerem o risco de momentum podem ser aplicadas a cryptomoedas e que machine learning contribui para reduzir a exposição a volatilidade

Value Creation in Cryptocurrency Networks: Towards A Taxonomy of Digital Business Models for Bitcoin Companies

Cryptocurrency networks have given birth to a diversity of start-ups and attracted a huge influx of venture capital to invest in these start-ups for creating and capturing value within and between such networks. Synthesizing strategic management and information systems (IS) literature, this study advances a unified theoretical framework for identifying and investigating how cryptocurrency companies configure value through digital business models. This framework is then employed, via multiple case studies, to examine digital business models of companies within the bitcoin network. Findings suggest that companies within the bitcoin network exhibits six generic digital business models. These six digital business models are in turn driven by three modes of value configurations with their own distinct logic for value creation and mechanisms for value capturing. A key finding of this study is that value-chain and value-network driven business models commercialize their products and services for each value unit transfer, whereas commercialization for value-shop driven business models is realized through the subsidization of direct users by revenue generating entities. This study contributes to extant literature on value configurations and digital businesses models within the emerging and increasingly pervasive domain of cryptocurrency networks

Speculation and lottery-like demand in cryptocurrency markets

This is the first paper that explores lottery-like demand in cryptocurrency markets. Since recent research provides evidence that cryptocurrency returns appear to be short-memory processes, we modify Bali, Cakici and Whitelaw’s (2011) and Bali, Brown, Murray, and Tang’s (2017) MAX measure and employ a weekly forecast horizon and daily log-returns from the previous week to calculate the metric for our portfolio sorts. From an econometric point of view, this study proposes statistical tests that are robust to unknown dynamic dependency structures in the cryptocurrency data. Our results show that average raw and risk-adjusted return differences between cryptocurrencies in the lowest and highest MAX quintiles exceed 1.50% per week. These results are robust after controlling for Bitcoin risk or potential microstructure effects. Our findings are important also from a theoretical point of view because they suggest that parallel to stock markets, similar behavioral mechanisms of underlying investor behavior are present also in new virtual currency markets.©2021 The Authors. Published by Elsevier B.V.This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).fi=vertaisarvioitu|en=peerReviewed

Pump, Dump, and then What? The Long-Term Impact of Cryptocurrency Pump-and-Dump Schemes

The pump and dump scheme is a form of market manipulation attack in which coordinated actors drive up the price of an asset in order to sell at a higher price. Due in part to a lack of enforcement, these schemes are widespread within the cryptocurrency marketplace, but the negative impact of these events on the coins they target is not yet fully understood. Drawing upon a novel dataset of pump events extracted from Telegram channels, an order of magnitude larger than the nearest comparable dataset in the literature, we explore the differing tactics of pumping channels and the long-term impact of pump and dump schemes across 765 coins. We find that, despite a short-term positive impact in some cases, the long-term impact of pump and dump schemes on the targeted assets is negative, amounting to an average 30% relative drop in price a year after the pump event