Market Efficiency in a Changing Asset Population: Mobility, Entry, and Survival over Cryptocurrency's Full History (arXiv (Cornell University))

Summary

• The study analyzes weak-form efficiency across 8,970 assets and 690 weekly cross-sections from 2013 to 2026, evaluating mobility across market capitalisation deciles.p.1
• Statistical weak-form efficiency symmetry is rejected across all market eras, though directional asymmetry drops by seventy percent from its historical peak.p.1
• Paper bottom-decile portfolios yield equal-weighted market-adjusted returns of 27.5% per week in the frontier era and 2.8% in the consolidation era among surviving assets.p.3
• Applying a basic liquidity screen of $10,000 in daily volume completely eliminates the frontier-era bottom-decile premium (t = 0.19).p.3
• Re-forming capitalisation deciles within the tradable cross-section yields a consolidation-era return gradient of just 0.01% per week (t = 0.04).p.3
• Weekly entry rates fell from 3.9% per week in the frontier era to 0.8% in the consolidation era, driving the observed convergence in rank asymmetry.p.4

Key insights

1. Directional asymmetry in decile transition probabilities declined steadily from a peak of 0.062 in late 2014 to 0.018 by the end of the sample.p.3
2. The paper return premium was concentrated in non-tradable coins, with the investable bottom decile holding an average of only 2.0 coins across 35 tradable weeks in the frontier era.p.3
3. The median equal-weighted capacity for the screened bottom-decile strategy in the consolidation era is capped at $293,000.p.3
4. In the consolidation era, 47% of bottom-decile coin-weeks report zero daily trading volume, generating stale quotes and artificially inflated jump returns.p.4
5. Enforcing a one-cent minimum price filter reduces the paper frontier-era bottom-decile weekly premium from 27.6% to 9.4%.p.4
6. Own-capitalisation asymmetry remained flat at 0.025–0.026 across eras, proving that rank asymmetry convergence was driven by compositional churn rather than coin valuation dynamics.p.4
7. Exit hazards decline monotonically with market size, falling from 2.0% per week in the bottom decile to 0.2% per week in the top decile.p.7