Abstract:

This study investigates the time series of price returns for 80 of the most liquid cryptocurrencies listed on Binance to identify the presence of detrended cross-correlations. Employing spectral analysis of the detrended correlation matrix and topological analysis of the minimal spanning trees calculated from this matrix, we analyze various positions within a moving window. Findings indicate that cryptocurrencies have become increasingly cross-correlated over time. The average cross-correlations rise over specific time scales, resembling the amplification of the Epps effect from past to present. The topology of the minimal spanning trees also evolves, becoming more centralized with higher maximum node degrees over short time scales, and more distributed yet still highly correlated over long time scales. Additionally, the study explores detrended cross-correlations between the cryptocurrency market and traditional markets such as stock, commodity, and Forex markets. It is observed that the cryptocurrency market exhibits higher levels of cross-correlation with these traditional markets during turbulent periods, coinciding with increased internal cross-correlations.

Key Points:

- Financial markets

- Cryptocurrencies

- Multiscale analysis

- Detrended cross-correlations

- Minimal spanning tree

- COVID-19

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