Turn-of-the-candle effect in bitcoin returns

Savva Shanaev*, Mikhail Vasenin, Roman Stepanov

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

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This study discovers a statistically and economically significant intraday anomaly on Bitcoin markets. Positive returns of 0.58 bps per minute are disproportionately concentrated at the turn of 15-min candles (in minutes 0, 15, 30, and 45 of each trading hour). Average returns in other trading minutes are negative. The effect is consistent across Bitcoin exchanges, in quantile regression models, and TGARCH-M estimations with heavy tails, and persist in out-of-sample tests. A high-frequency strategy that exploits this “turn-of-the-candle” effect can be net-outperforming with initial investment as low as $5,000. The anomaly is detected in the data starting from mid-to-late 2020, is potentially associated with algorithmic trading relying on the arrival of 15-min candle information, and its discovery contributes significantly to the understanding of cryptocurrency adaptive market efficiency.
Original languageEnglish
Article numbere14236
Number of pages9
Issue number3
Early online date2 Mar 2023
Publication statusPublished - Mar 2023

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