Trading Volume and Cryptocurrency Returns

Abstract

In this study, we examine the relationship between changes in cryptocurrency trading volume and contemporaneous cryptocurrency returns. Additionally, we investigate the predictive power of changes in cryptocurrency trading volume for future cryptocurrency returns. We find a direct relationship between change in trading volume and the contemporaneous returns, consistent with Gervars, Kaniel and Mingelgrin for cryptocurrencies tradable on Coinbase exchange. Additionally, we uncover that the changes in trading volume have significant predictive power for future cryptocurrency returns for cryptocurrencies tradable on Coinbase exchange. We, however, do not find a connection between changes in trading volume and returns for cryptocurrencies not tradable on Coinbase exchange. Our findings suggest the presence of a weak-form inefficiency in the cryptocurrency market; cryptocurrency prices do not reflect available information.