Sains Malaysiana 54(11)(2025): 2785-2796

http://doi.org/10.17576/jsm-2025-5411-17

 

The Dragon King Phenomenon (Super-Extreme Outliers) in Cryptocurrency. Is Bitcoin the Riskier One?

(Fenomena Raja Naga (Pencilan Super-Ekstrem) dalam Mata Wang Kripto. Adakah Bitcoin Lebih Berisiko?)

 

LEVAN RAJ SELVA RETNAM¹, SAIFUL IZZUAN HUSSAIN¹ & NADIAH RUZA^2,*

 

¹Department of Mathematical Sciences, Faculty of Science and Technology, Universiti Kebangsaan Malaysia, 43600 UKM Bangi, Selangor, Malaysia

²School of Business and Economics, Universiti Putra Malaysia, 43400 UPM Serdang, Selangor, Malaysia

 

Diserahkan: 5 Mac 2025/Diterima: 24 Oktober 2025

 

Abstract

This study was conducted to identify the existence of the phenomenon of Dragon Kings (DKs) in five notable cryptocurrencies, namely Bitcoin, Dogecoin, Ethereum, Litecoin and Ripple. DKs are meaningful extreme outliers that occasionally fall outside the Pareto or power-law distribution. These examples have been statistically identified as extreme of extreme returns that occur more frequently than the power law distribution predicts. The study uses the Pareto distribution, usually associated with extreme data, to examine the upper and lower tails of returns. The result shows that the upper and lower tails of the returns of all the cryptocurrencies studied prove the existence of the Dragon Kings mechanism. Contrary to expectations, Bitcoin has seen the most unpreditable of extreme returns compared to other cryptocurrencies. This characteristic causes Bitcoin notably challenging to forecast. The results of this study are crucial for investors to evaluate and understand the Dragon King events, which represent returns that are exceptionally extreme even among other extreme values (super-extreme) observed in these financial assets.

Keywords: Cryptocurrency; Dragon Kings; extreme outliers

 

Abstrak

Kajian ini dijalankan untuk mengenal pasti kewujudan fenomena Raja Naga (DK) dalam lima mata wang kripto yang terkenal, iaitu Bitcoin, Dogecoin, Ethereum, Litecoin dan Ripple. DK adalah pencilan ekstrem yang bermakna yang adakalanya jatuh di luar taburan Pareto atau kuasa. Contoh ini telah dikenal pasti secara statistik sebagai pulangan ekstrem yang berlaku lebih kerap daripada yang diramalkan oleh taburan kuasa. Kajian ini menggunakan taburan Pareto yang biasanya dikaitkan dengan data ekstrem untuk meneliti ekor atas dan bawah pulangan. Keputusan menunjukkan bahawa ekor atas dan bawah pulangan semua mata wang kripto yang dikaji membuktikan kewujudan mekanisme Raja Naga. Bertentangan dengan jangkaan, Bitcoin telah melihat pulangan ekstrem yang paling tidak dapat diramalkan berbanding dengan mata wang kripto yang lain. Ciri ini menyebabkan Bitcoin sangat sukar untuk diramalkan. Keputusan kajian ini adalah kritikal bagi pelabur untuk menilai dan memahami secara ekstrem terhadap pulangan ekstrem yang boleh berlaku dalam aset kewangan ini.

Kata kunci: Mata wang kripto; pencilan ekstrem; Raja Naga

 

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*Pengarang untuk surat-menyurat; email: nadiah_ruza@upm.edu.my