**1. Introduction**

Bitcoin and other digital currencies have spurred interest for research since late 2016 due to their increasing attractiveness as an investment tool. This has brought about a proliferating bulk of high-quality relevant academic papers (inter alia: Dyhrberg 2016a, 2016b; Katsiampa 2017; Corbet et al. 2018, 2019; Beneki et al. 2019; Kyriazis 2019). Cryptocurrencies are highly innovative means of transactions that have gained increasing popularity among investors and especially speculators seeking high profits, despite risk. Nevertheless, the functions of digital currencies as means for store of value and a unit of account are far from being established in the perceptions of economic agents. Nevertheless, the innovative character, the non-complexity and the lack of opacity in such currencies has led to the flourishing of issuance of new cryptocurrencies.

Decentralized transaction systems with blockchain technology have proven very promising for economic units of various risk appetites. Investments in digital currencies are considered to be extremely volatile although amazingly profitable in bullish periods. Investment and profit-making opportunities have also been apparent during bearish markets due to the high volatility of digital currencies. Emphasis should be paid to the fact that a small number of virtual coins that are most popular for investors make up a very large portion of market capitalization in the cryptocurrency markets.

This study builds on Wei (2018) which was the first academic paper investigating the liquidity levels of a very wide range of digital currencies. There are two main research hypotheses tested in this paper. Firstly, it is examined whether popular cryptocurrencies such as Bitcoin, Ethereum, Monero, Dash, Cardano and Steem are preferable by investors in bearish conditions in the cryptocurrency markets. Thereby, we investigate how the popularity and the incumbent character of specific coins in the virtual currency markets a ffect decision-making about active trading.

The remainder of this study is organized as follows: Section 2 provides the main literature concerning digital currencies up to the present. Section 3 presents the data and methodology employed in order to conduct estimations about liquidity levels. Section 4 lays out and discusses the results as well as analyzes the economic implications. Finally, Section 5 concludes.
