Exploring market efficiency in cryptocurrencies: Fourier analysis of non-linear dynamics and breaks

Year 2025, Volume: 54 Issue: 3, 374 - 389, 31.12.2025

Cemal Öztürk

https://doi.org/10.26650/ibr.2025.54.1666799

https://izlik.org/JA38YN28ZK

Abstract

This study evaluates cryptocurrency market efficiency through an analysis of 25 leading cryptocurrencies traded between 2014 and 2024. This research employs the Augmented Dickey–Fuller (ADF) test and its Fourier-augmented variant (Fourier ADF, FADF), the Kapetanios–Shin–Snell (KSS) test, and its Fourieraugmented counterpart (Fourier KSS, FKSS) as advanced econometric methods to detect unit roots and to assess whether these assets conform to the weak-form Efficient Market Hypothesis (EMH). The research obtained data from Yahoo Finance through web scraping to perform a detailed analysis of price movements, market behavior, and structural changes. Some cryptocurrencies show efficient market behavior, whereas numerous others demonstrate non-linear patterns, structural breaks, and price predictability, indicating market inefficiencies. The findings of this study have major implications for investors and policymakers because they demonstrate the need to analyze cyclical patterns and nonlinear market behaviors in cryptocurrency markets. This research extends current knowledge by using Fourier-based tests to detect smooth breaks, which provides a more detailed understanding of the efficiency of the cryptocurrency market.

Keywords

Efficient market hypothesis (EMH) , Cryptocurrency markets , Fourier analysis , Non-linear dynamics , Smooth breaks , Web scraping , Time series analysis

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