Revisiting the volatility of bitcoin with approximate entropy
Issued Date
2022-01-01
Resource Type
eISSN
23322039
Scopus ID
2-s2.0-85121577582
Journal Title
Cogent Economics and Finance
Volume
10
Issue
1
Rights Holder(s)
SCOPUS
Bibliographic Citation
Cogent Economics and Finance Vol.10 No.1 (2022)
Suggested Citation
Dehouche N. Revisiting the volatility of bitcoin with approximate entropy. Cogent Economics and Finance Vol.10 No.1 (2022). doi:10.1080/23322039.2021.2013588 Retrieved from: https://repository.li.mahidol.ac.th/handle/20.500.14594/84539
Title
Revisiting the volatility of bitcoin with approximate entropy
Author(s)
Author's Affiliation
Other Contributor(s)
Abstract
Two distinct and non-redundant understandings of volatility, as deviation from consistency, exist for a time-series: (1) exhibiting high standard deviation and, closer to the dictionary definition of the term, (2) appearing highly irregular and unpredictable. We find that Bitcoin is a prime example of an asset for which the two concepts of volatility diverge. We show that, historically, Bitcoin combines high Standard Deviation and low Approximate Entropy, relative to Gold and S&P 500. Moreover, subsample analysis for different time-scales (daily, weekly, monthly) shows that lower sampling frequencies drastically reduce the Kurtosis of the distribution of log-returns of Bitcoin. The opposite effect is observed for Gold and S&P 500. These properties suggest that, contrary to the volatility of the two traditional assets, Bitcoin’s high volatility is essentially an intra-day phenomenon that is strongly attenuated for a weekly or monthly time-preference.