ARTICLE | Chaos Solutions & Fractals | Vol.164, 2022

Abstract

This study investigates the transmission channel of information diffusion in the network of Bitcoin and its six forks using daily closing prices from the start of trading for each one to September 24, 2021. In particular, the price series are stationarized for further analysis by converting them to log returns. We find the following: (i) the Bitcoin market has the central authority of information flow because of its large market size and high liquidity, and (ii) the Bitcoin Gold and Bitcoin Diamond markets collaborate in information dissemination and intermediary role despite their small market size and low liquidity. Using the scaling and Hurst exponents, we explain the roles of Bitcoin, Bitcoin Gold, and Bitcoin Diamond in the network of forks. The potential externality emerges from a highly liquid market and spreads through efficient markets in terms of price fairness, resulting in considerable information share in the cryptocurrency market. Our findings suggest that the forks' network evolves for preference heterogeneity rather than for a single dominant entity with market leadership in the network.