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Economics > Econometrics

arXiv:2411.06327 (econ)
[Submitted on 10 Nov 2024]

Title:Return-forecasting and Volatility-forecasting Power of On-chain Activities in the Cryptocurrency Market

Authors:Yeguang Chi, Qionghua (Ruihua)Chu, Wenyan Hao
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Abstract:We investigate the return-forecasting and volatility-forecasting power of intraday on-chain flow data for BTC, ETH, and USDT, and the associated option strategies. First, we find that USDT net inflow into cryptocurrency exchanges positively forecasts future returns of both BTC and ETH, with the strongest effect at the 1-hour frequency. Second, we find that ETH net inflow into cryptocurrency exchanges negatively forecasts future returns of ETH. Third, we find that BTC net inflow into cryptocurrency exchanges does not significantly forecast future returns of BTC. Finally, we confirm that selling 0DTE ETH call options is a profitable trading strategy when the net inflow into cryptocurrency exchanges is high. Our study lends new insights into the emerging literature that studies the on-chain activities and their asset-pricing impact in the cryptocurrency market.
Subjects: Econometrics (econ.EM)
Cite as: arXiv:2411.06327 [econ.EM]
  (or arXiv:2411.06327v1 [econ.EM] for this version)
  https://doi.org/10.48550/arXiv.2411.06327

Submission history

From: Yeguang Chi [view email]
[v1] Sun, 10 Nov 2024 01:27:49 UTC (1,531 KB)
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