https://doi.org/10.52903/wp2026361
CRYPTOKURTOSIS: FREQUENT TRADING FUELS HIGHER LOSSES
Stavros Degiannakis
Bank of Greece and Panteion University of Social and Political Sciences
George Filis
Panteion University of Social and Political Sciences
Grigorios Siourounis
Panteion University of Social and Political Sciences
ABSTRACT
We assess the impact of cryptocurrencies ultra-high frequency trading on financial stability. Focusing on three well-established cryptocurrencies, namely Bitcoin, Ethereum and Sui, we show that as the trading frequency increases, so do the excess potential losses of the investors, over and above the anticipated losses based on the Value-at-Risk. This is led by the exponential growth of the kurtosis that is exhibited at high-frequency trading. Given that currently the minimum capital requirements do not differentiate between the trading frequency but only between the type of crypto assets groups, we show that such overlook poses a threat to the financial stability.
JEL-classifications: C40, C54, F30, G10, G15, G17
Keywords: Block chain, Cryptocurrencies, Finite moments, Risk management, Ultra-high frequency trading
Disclaimer: The views expressed in this paper are those of the authors and not necessarily those of either the Bank of Greece or the Eurosystem.
Correspondence:
Stavros Degiannakis
Economic Analysis and Research Department
Bank of Greece
El. Venizelos 21, 10250 Athens, Greece
Tel.: +30-2103202386
email: sdegiannakis@bankofgreece.gr