Cointegration-based pairs trading framework with application to the Cryptocurrency market

This research examines the possibilities of pairs trading in the newest, unexplored nancial market: the cryptocurrency market. By applying the Engle-Granger 2-Step Method, coin- tegrated cryptocurrency pairs are identied. Next, protability of four arbitrarily selected pairs is tested by using pairs trading with a set of trading criteria. In a 60-day trading period all four pairs show protability, arising from arbitrage opportunities in the cryptocurrency market. Therefore, this research concludes that the Ecient Market Hypothesis does not hold for the cryptocurrency market.