Stylized facts in Web3

ArXiv ID: 2408.07653 “View on arXiv”

Authors: Unknown

Abstract

This paper presents a comprehensive statistical analysis of the Web3 ecosystem, comparing various Web3 tokens with traditional financial assets across multiple time scales. We examine probability distributions, tail behaviors, and other key stylized facts of the returns for a diverse range of tokens, including decentralized exchanges, liquidity pools, and centralized exchanges. Despite functional differences, most tokens exhibit well-established empirical facts, including unconditional probability density of returns with heavy tails gradually becoming Gaussian and volatility clustering. Furthermore, we compare assets traded on centralized (CEX) and decentralized (DEX) exchanges, finding that DEXs exhibit similar stylized facts despite different trading mechanisms and often divergent long-term performance. We propose that this similarity is attributable to arbitrageurs striving to maintain similar centralized and decentralized prices. Our study contributes to a better understanding of the dynamics of Web3 tokens and the relationship between CEX and DEX markets, with important implications for risk management, pricing models, and portfolio construction in the rapidly evolving DeFi landscape. These results add to the growing body of literature on cryptocurrency markets and provide insights that can guide the development of more accurate models for DeFi markets.

Keywords: Web3 Ecosystem, DeFi, Volatility Clustering, Heavy Tails, DEX vs CEX, Cryptocurrency / Web3 Tokens

Complexity vs Empirical Score

• Math Complexity: 4.0/10
• Empirical Rigor: 8.0/10
• Quadrant: Street Traders
• Why: The paper focuses on empirical statistical analysis of token returns using standard econophysics methods (heavy tails, clustering), without advanced mathematical derivations. It is heavily data-driven with specific data sources (Binance, Coinbase, Uniswap), code links, and multiple asset comparisons, making it highly backtest-ready.

  flowchart TD
    A["Research Goal<br>Analyze stylized facts<br>in Web3 ecosystem tokens"] --> B["Data Collection<br>Historical price data<br>CEX vs DEX tokens"]
    B --> C["Statistical Analysis<br>Probability distributions<br>Tail behavior & Volatility"]
    C --> D{"Comparison Analysis<br>CEX vs DEX Markets"}
    D --> E["Key Finding 1<br>Heavy tails → Gaussian convergence<br>across time scales"]
    D --> F["Key Finding 2<br>Volatility clustering present<br>in both CEX and DEX"]
    D --> G["Key Finding 3<br>Arbitrage maintains<br>price alignment across markets"]
    E --> H["Outcomes<br>Risk management models<br>Portfolio construction<br>DeFi pricing frameworks"]
    F --> H
    G --> H