Causal Relationship among Cryptocurrencies: A Conditional Quantile Approach

Abstract This study uses a Granger non-causality test in quantiles to extend the investigation of the causality among cryptocurrencies. The empirical results reveal that (i) no quantile uncorrelated cryptocurrency is found by the Granger non-causality test in quantiles. (ii) Statistically strong bi-directional causal relationships exist only between Ripple and other cryptocurrencies over the quantile level [0.05, 0.95]. (iii) There are strong causal relationships between cryptocurrencies’ returns over high quantile levels, such as, [0.6, 0.8] and [0.8, 0.95]. (iv) The largest cryptocurrencies, that is, Bitcoin (BTC) and Ethereum (ETH), have stronger causality to smaller ones in high quantiles. The results of the non-causality test suggest a significant causal relationship in the tail quantile, which makes it hard for investors to hedge the risk in the cryptocurrency market.