Size-Momentum Puzzle in Cryptocurrencies

Abstract

This paper documents a robust size-dependent pattern in cryptocurrency return predictability. Small coins exhibit strong short-term reversal, whereas large coins exhibit momentum, and the relation varies monotonically across the size distribution. We further show that these two sides of the pattern reflect different return dynamics: small-coin reversal is driven mainly by rebounds among recent losers, while large-coin momentum reflects their continued underperformance. Liquidity frictions and idiosyncratic volatility explain part of this pattern, but not all of it. These findings point to a "size-momentum puzzle" in cryptocurrencies.