The crypto Wild West: a deep dive into the market volatility of junk coins versus Bitcoin

António Portugal Duarte, Fátima Sol Murta and Simão Oliviera

Abstract

This study analyzes the volatility of Bitcoin returns in comparison with that of three cryptocurrencies commonly referred to as “junk coins” or “shitcoins”: Dogecoin, Shiba Inu and Baby Doge Coin. To achieve this, we employ generalized autoregressive conditional heteroscedasticity models, a methodology frequently used to identify volatility patterns in financial time series. Our empirical findings reveal that Bitcoin’s returns exhibit significantly lower volatility than the three alternative cryptocurrencies. This outcome reinforces Bitcoin’s role as the benchmark cryptoasset within the cryptocurrency market. In contrast, Baby Doge Coin displays pronounced volatility, highlighting its heightened susceptibility to speculative trading. The other junk coins, Dogecoin and Shiba Inu, while more stable than Baby Doge Coin, still show a considerably higher degree of volatility than Bitcoin. The prevalence of such destabilizing behavior amplifies long-term investment risks and undermines market credibility, potentially hindering the broader acceptance of these junk coins as viable alternatives to fiat currencies.