What Is the Efficient Market Hypothesis (EMH) and Its Three Forms?
The EMH posits that asset prices reflect all available information. The Weak form suggests prices reflect past trading data, making technical analysis useless.
The Semi-Strong form states prices reflect all public information, negating fundamental analysis based on public data. The Strong form asserts prices reflect all information, public and private, making even insider trading ineffective.
Real-world markets, especially crypto, often exhibit inefficiencies.
Glossar
EMH
Efficiency ⎊ : The theory posits that asset prices instantaneously reflect all available public and private information, precluding consistent alpha generation through analysis of historical data or public disclosures.
Efficient Market Hypothesis
Arbitrage ⎊ The Efficient Market Hypothesis (EMH) within cryptocurrency and derivatives markets posits that asset prices fully reflect all available information, rendering consistent abnormal returns unattainable; however, the nascent nature of these markets introduces deviations from this ideal, creating transient arbitrage opportunities exploitable through high-frequency trading strategies and sophisticated quantitative models.
Predictable Price Patterns
Pattern ⎊ Within cryptocurrency derivatives and options trading, predictable price patterns represent recurring formations observable across historical data, indicative of potential future price movements.