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Bitcoin return: Impacts from the introduction of new altcoins

2019; Elsevier BV; Volume: 48; Linguagem: Inglês

10.1016/j.ribaf.2019.02.001

1878-3384

Thai Vu Hong Nguyen, Binh Thanh Nguyen, Thanh Cong Nguyen, Quang Quoc Nguyen,

Financial Markets and Investment Strategies

The model predicting Bitcoin price formation remains a mystery to academia and investors. Newly invented cryptocurrencies (alternative coins – altcoins) with enhanced features may become close substitutes to Bitcoin in terms of risk diversification. Employing Autoregressive-Distributed-Lag (ARDL) estimations, we document the evidence that the introduction of a new altcoin tends to lower Bitcoin return by 0.7% which is substantial given that the average and median daily returns of Bitcoin are 0.63% and 0.27%, respectively. Our study suggests that the negative impact of an Initial Public Offering on existing stock prices can also be observed in the cryptocurrency market: altcoin introductions reduce Bitcoin return.