The Impact of Common Market, Up Market, and Down Market on the Herding Behavior of Top 10 Capitalization Cryptocurrencies

Abstract

Cryptocurrencies have become increasingly popular among investors and literature around the world. In recent years, there have been a series of events that caused high volatility due to market corrections of more than 10% to nearly 40% such as COVID-19 and FTX bankruptcy. This research seeks to determine the existence of herding behavior during this timeframe across three distinct market conditions. The approach utilized is the Cross-Sectional Absolute Deviation (CSAD) method, which is known for its popularity and reliability. The analysis will be performed on 10 cryptocurrencies spanning from 2018 to 2024. The selected cryptocurrencies include Bitcoin (BTC), Bitcoin Cash (BCH), Cardano (ADA), Ethereum (ETH), Tether (USDT), BNB (BNB), Tron (TRX), Litecoin (LTC), Monero (XMR), and XRP (XRP). The findings reveal that there is a form of anti-herding behavior present in both the overall market and the rising market, which contradicts numerous earlier studies. The declining market also demonstrates a tendency toward anti-herding behavior, although the significance of this finding is minimal.