Despite the widespread interest in cryptoassets as an alternative asset class, there is still little consensus on whether they act in a manner that justifies their inclusion from a portfolio diversification perspective. The question often asked by market participants is whether cryptoassets are truly segmented…

Concerns about financial bubbles in cryptoassets have intensified, given the rapid and unprecedented rise in their market capitalisation (currently at almost $2 trillion) and return of high volatility.   The very existence of bubbles in financial markets is somewhat controversial in the academic literature. In…

This article explores the aggregate performance of cryptoasset funds since the outbreak of the Covid-19 pandemic. More specifically, we compare the performance of cryptoasset funds against the raw returns of the aggregate stock market and “traditional” hedge funds. 1. Introduction The global health crisis originated…

This article explores the current Decentralised Finance (DeFi) landscape, as well as the existing opportunities and risks. DeFi refers to an alternative, distributed ledger based, financial infrastructure. Most DeFi infrastructure is built on Ethereum, though increasing competition from alternative platforms, such as Cardano, Tron and…

This article aims to investigate the relationship between Bitcoin market dominance, measured as the market capitalisation in US dollars of Bitcoin relative to the total universe of cryptoassets, and the dynamics of returns for non-Bitcoin assets, also known as “altcoins”. Introduction The textbook definition of…

The very existence of bubbles in financial markets is somewhat controversial. For instance, the eminent financial economist Eugene F. Fama defines a “bubble” as an “irrational strong price increase that implies a predictable strong decline” (Fama 2014, p.1475). Fama’s argument, in essence, is that if…

Liquidity and Downside Risk in Bitcoin The likelihood of severe contractions in the price of an asset is inherently linked to liquidity. For instance, funding shocks decrease market liquidity, leading to speculator losses on their initial positions, forcing them to sell more, causing a further…

Analysing correlations between cryptoassets and traditional asset classes is important when trying to understand the effects of these assets within a portfolio. By analysing cross-sectional relationships and how ‘dense’ the dynamics of returns are, we can understand just how “Risk-on” or “Risk-off” the markets actually…

This article investigates the relationship between market efficiency and liquidity in cryptoasset markets. The empirical evidence is currently scarce, with most existing studies focusing on a small cross section of the most liquid cryptoassets. This, however, offers a limited picture. Therefore, we extend our analysis…

The notion of efficient markets (Fama 1970) suggests that a lack of return predictability is the key criteria for efficiency. The market microstructure literature emphasises a separate measure of financial market quality, namely, the amount of private information reflected in prices. As Kyle (1985) points…