Web3 Usage and its Value for Crypto

Sammanfattning: Cryptocurrencies have grown significantly in recent years, and their role in society remains a highly debated subject. In "Common Risk Factors in Cryptocurrency," Liu, Tsyvinski, and Wu explore whether models from traditional finance can be applied to the cryptocurrency market to create successful trading strategies. This thesis replicates their work and extends it by exploring whether web3 usage can help explain market behavior. The experiment includes all cryptocurrencies with a market capitalization of over $1 million between January 1, 2014, and May 5, 2022, and 24 characteristics of the cryptocurrencies are considered. The results show that what strategies deliver significant excess returns have changed for the extended time frame. Furthermore, the web3 usage factor is shown to improve the three-factor model created in Liu et al (2022).