A tick-by-tick level measurement of the lead-lag duration between cryptocurrencies: The case of Bitcoin versus Cardano

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According to past research utilizing Bitcoin and other cryptocurrencies, Bitcoin has been shown to lead most other cryptocurrencies in terms of price movements. However, existing studies tend to focus on the direction of the lead-lag relationship instead of the duration of the lead-lag time. Furthermore, they are handicapped by the reliance on low-frequency data such as daily prices. This paper showcases the measurement of the lead-lag duration between cryptocurrencies using ultra-high-frequency tick-by-tick data, via the pair of Bitcoin and Cardano. Tick-by-tick data bring unique challenges in terms of methodology. The vast majority of time series econometrics methods are designed for use with data collected at regularly spaced time intervals, such as every hour, every day, etc. Tick-by-tick data, on the other hand, are not synchronized in any way and do not arrive at consistently spaced time intervals. Consequently, an asynchronous data integration methodology is utilized to estimate the Bitcoin price lead over Cardano price for each month beginning in January 2019 and continuing through May 2021. The length of the lead time ranges from 16 seconds to 118 seconds, with an average of around 57 seconds. Throughout the study period, the lengths of the lead time manifest a general trend of decline, which is shown to be statistically significant via non-parametric tests. Testing of seasonal patterns turns out to be not significant. The methodology and the findings of this paper have implications for both academics and practitioners, for example, when studying and implementing statistical arbitrage with cryptocurrencies.

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    • Figure 1. A simple illustration of the Cardano price sequence
    • Figure 2. The asynchronous integration of Bitcoin and Cardano prices
    • Table 1. Estimation steps for the lead time of Bitcoin over Cardano, for January 2020
    • Table 2. Estimated lead time for each month
    • Table 3. Stata output from fitting the first unobserved-components model
    • Table 4. Stata output from fitting the second unobserved-components model
    • Conceptualization
      Bing Anderson
    • Data curation
      Bing Anderson
    • Formal Analysis
      Bing Anderson
    • Investigation
      Bing Anderson
    • Methodology
      Bing Anderson
    • Project administration
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    • Resources
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    • Software
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    • Supervision
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    • Validation
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    • Visualization
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    • Writing – original draft
      Bing Anderson
    • Writing – review & editing
      Bing Anderson