Cryptocurrency momentum: is it there? – Persistence and predictability

Absztrakt (kivonat)

This study seeks to examine the enduring nature of cryptocurrency momentum and the capacity to forecast its profitability. In light of the distinguishing findings in the existing literature, this study thoroughly investigates the momentum anomaly. The findings of this paper demonstrate that the cryptocurrency momentum effect exists and is persistent, as indicated by the momentum portfolio’s average weekly return of 2.60%. Enhancing this strategy conditional on the momentum gap—the difference between the returns of past winners and past losers in the formation period—as proposed by Huang (2022), increases the Sharpe ratio of the momentum strategy by nearly 9%, to 1.41. This strategy’s superior performance remains robust across different time periods and for alternative portfolio constructions.