Abstract:
Momentum trading strategies have been noted as the principal market anomaly
that has the potential to successfully predict future market prices. Momentum
trading strategies have formed part of a multitude of research, proving successful
results across all traditional asset classes. Understanding the price predictability
of momentum strategies on cryptocurrencies is important as they are a relatively
new financial asset and are attracting institutional investors' attention. The
objective of the study was to test whether momentum trading strategies would
produce significant positive returns when applied to cryptocurrencies. The study
tested time-series and cross-sectional momentum trading strategies across 15
cryptocurrencies over a 6 year period (2016-2022). The study found that
momentum strategies generally produce positive returns when applied to the 15
cryptocurrencies over the sample period. However, the positive returns produced
by the time series and cross-sectional momentum trading strategies were not
significant. In addition, the study found that time-series momentum strategie
applied to individual cryptocurrencies, in isolation, could be used to identify
cryptocurrencies which produce significant returns.
