ARTICLE | Chaos Solitons & Fractals | Vol.142, 2021

Abstract

This study examines information flow between new and old forks after Bitcoin splits. Particularly, we estimate the transfer entropy between Bitcoin and Bitcoin Cash as an information-theoretic approach. When a symbolic analysis is applied, asymmetric information flow from Bitcoin to Bitcoin Cash is observed. We further provide evidence that this relationship is due to the role of liquidity in price leadership. Our findings suggest that (i) investors could forecast the fluctuation of price evolution in the Bitcoin Cash using the rise–fall pattern of Bitcoin price and (ii) policymakers (regulators) must closely monitor the information flow between the two markets, in a state with strong market integration, to prevent market distortion and regulatory arbitrage.