Nonlinear Dynamics of Systematic Risk in Cryptocurrency Market: A Multifractal Analysis

Systematic risk and asset-market-comovement is a crucial dynamic of financial markets and asset pricing, especially for cryptocurrencies. This paper studies the cryptocurrency market and explores systematic risk behavior in a nonlinear way. In this study, systematic risk coefficients of the largest 25 cryptocurrencies are calculated and evaluated using multifractal detrended fluctuation analysis (MF-DFA). The findings show that cryptocurrency systematic risks are not constant, instead, they are dynamic and time-varying. Further, multifractal analysis is applied and it is observed that beta coefficients are multifractal and exhibit persistent/antipersistent behavior in small/large fluctuations. Moreover, the analysis displays that the main sources of multifractality in systematic risk of cryptocurrencies are nonlinear temporal correlations while heavy-tailed distributions and linear correlations show amplifying effects. The findings of this paper offer crucial findings for the literature and important information for investors in cryptocurrency market.