Wavelet Analysis of Cryptocurrencies – Non-Linear Dynamics in High Frequency Domains

ArXiv ID: 2411.14058 “View on arXiv”

Authors: Unknown

Abstract

In this study, we perform some analysis for the probability distributions in the space of frequency and time variables. However, in the domain of high frequencies, it behaves in such a way as the highly non-linear dynamics. The wavelet analysis is a powerful tool to perform such analysis in order to search for the characteristics of frequency variations over time for the prices of major cryptocurrencies. In fact, the wavelet analysis is found to be quite useful as it examine the validity of the efficient market hypothesis in the weak form, especially for the presence of the cyclical persistence at different frequencies. If we could find some cyclical persistence at different frequencies, that means that there exist some intrinsic causal relationship for some given investment horizons defined by some chosen sampling scales. This is one of the characteristic results of the wavelet analysis in the time-frequency domains.

Keywords: wavelet analysis, high-frequency data, efficient market hypothesis, time-frequency domains, non-linear dynamics, Cryptocurrencies

Complexity vs Empirical Score

  • Math Complexity: 7.5/10
  • Empirical Rigor: 6.0/10
  • Quadrant: Holy Grail
  • Why: The paper employs advanced mathematical concepts like symplectic geometry and detailed wavelet transform equations (e.g., continuous wavelet transform with Morlet wavelets) on a real dataset (cryptocurrencies and macro assets) with time-series analysis, indicating a mix of theoretical depth and data-driven methodology.
  flowchart TD
    A["Research Goal<br>Test Efficient Market Hypothesis<br>for Cryptocurrencies using Wavelet Analysis"] --> B["Methodology<br>Wavelet Analysis on Time-Frequency Domains"]
    B --> C["Data Input<br>High-Frequency Cryptocurrency Price Data"]
    C --> D["Computational Process<br>Apply Wavelet Transform to detect<br>Non-Linear Dynamics and Cyclical Persistence"]
    D --> E["Key Findings<br>Presence of Cyclical Persistence<br>at specific frequencies<br>Weak Form EMH Validation"]