Market Efficiency for Bitcoin

Abstract: The essence of market efficiency has been an interesting area for inspection by investors and scholars. In this study, we investigate the efficiency of a relatively new asset: Bitcoin. This paper examines the efficiency of Bitcoin by studying the impact of Bitcoin’s so-called halving dates. To test for weak-form market efficiency, we check for the random walk, in addition to employing statistical tests of the martingale difference hypothesis in returns. Based on our results, we find evidence of the time-varying efficiency degree of the Bitcoin market. The return predictability is discovered to be driven by changes in market conditions, as implied by the adaptive market hypothesis. The results also show a decreasing trend in the inefficiency given the sequential halving dates. This means that Bitcoin is becoming more efficient over time, even though the evidence is relatively weak.