Risks and Returns in the Crypto Ecosystem: An Updated Comparative Analysis Between the CAPM and Multifactor Models

Identifier:  TFG:9602

Handle: https://hdl.handle.net/20.500.11797/TFG9602

Authors:  Stefanov Davidkov, Aleksander

Abstract:
This study analyzes the determinants of returns for the five leading cryptocurrencies (2016–2023) using the multifactor model proposed by Liu et al. Empirical results demonstrate that the massive influx of institutional capital has triggered a profound structural shift. We observe a process of beta-ization in which the Market Factor absorbs explanatory power, thereby reinforcing the CAPM. Furthermore, the analysis reveals that the historical Size premium disappears in this new institutional era, while a selective Momentum factor emerges. We conclude that this institutionalization arbitrages away past inefficiencies, empirically validating the adoption of passive, index-based management for investment funds.