[2020-03]

After the Splits: Information Flow between Bitcoin and Bitcoin Family

Yi, Eojin

Moon Soul Graduate School of Future Strategy, KAIST
 
Cho, Yerim

Department of Industrial Engineering, Yonsei University
 
Sohn, Sungbin

HSBC Business School, Peking University
 
Ahn, Kwangwon

Department of Industrial Engineering, Yonsei University

ABSTRACT

This paper investigates the information flow between new and old forks after the Bitcoin splits. Particularly, we estimate the transfer entropy between Bitcoin and Bitcoin Cash as an information-theoretic approach. We find that the data, when symbolic analysis is applied, exhibit an asymmetric information flow from Bitcoin to Bitcoin Cash. Further investigation suggests that the reason relates to the role of liquidity in price leadership. Our results imply that the information flow between the cryptocurrency and its split coin, which has not realized its value, exists at least on the rise–fall price pattern.

Keywords: Bitcoin; Hard fork; Symbolic time series analysis; Transfer entropy