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Value Premium, Network Adoption, and Factor Pricing of Crypto Assets

SSRN Electronic Journal
2022
  • 15
    Citations
  • 7,357
    Usage
  • 53
    Captures
  • 1
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    15
    • Citation Indexes
      14
    • Policy Citations
      1
      • Policy Citation
        1
  • Usage
    7,357
    • Abstract Views
      6,303
    • Downloads
      1,054
  • Captures
    53
  • Mentions
    1
    • News Mentions
      1
      • News
        1
  • Ratings
    • Download Rank
      22,231

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Article Description

We document characteristics-based return anomalies in a large cross-section (>4,000) of crypto assets. Cryptocurrency returns exhibit momentum in the largest-cap group, reversals in other size groups, and strong crypto value and network adoption premia, from which we derive two novel factors to add to the cryptocurrency versions of market, size, and momentum factors. The resulting C-5 model outperforms extant models in pricing the cross-section of crypto assets and test portfolios in-sample and out-of-sample. We also provide the first comprehensive classification of all major cryptocurrencies based on their economic functionality. We then adopt methodologies from international finance to demonstrate significant market segmentation across token categories, underscoring the importance for considering token categories in investment and regulatory policymaking.

Bibliographic Details

Lin William Cong; George Andrew Karolyi; Ke Tang; Weiyi Zhao

Elsevier BV

Blockchain; Cryptocurrency; DeFi; Factor Models; Network Effect; Market Segmentation

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