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In this study, we investigate the existence of chaos in the global cryptocurrency market. Specifically, we analyze parameters of chaotic order, nonlinearity, sensitivity to the initial conditions, monofractality, and multifractality. For this purpose, we conduct a comprehensive series of tests, including Brock–Dechert–Scheinkman (BDS) test, largest Lyapunov exponent, box-counting, and monogram analysis for fractal dimension, and multiple tests for long-range dependence (Aggregated Variances, Peng, Higuchi, R/S Analysis, and Multifractal Detrended Fluctuation Analysis (MFDFA)). All tests are performed over a variety of major cryptocurrencies: Bitcoin, Litecoin, Ethereum, and Ripple. The empirical results support the existence of chaos in the cryptocurrency market. Accordingly, cryptocurrency returns are not random and follow a chaotic order. Therefore, long term predictions are not possible, contrary to most of the discussions ongoing in the media and the public.
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Günay et al. (2019) studied this question.
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