Search results
1 – 10 of over 1000This chapter introduces the concept of cryptocurrencies such as bitcoin, ether, or litecoin. The chapter describes the history of cryptocurrency, blockchain technology, and the…
Abstract
This chapter introduces the concept of cryptocurrencies such as bitcoin, ether, or litecoin. The chapter describes the history of cryptocurrency, blockchain technology, and the quest for secure digital money, followed by a discussion of cryptocurrency as a phenomenon. Next, it discusses individual cryptocurrencies, including an overview of bitcoin and relevant subgroups, such as so-called forks or privacy coins. It also explains developments such as stablecoins or central bank digital currencies, which are potentially much more in line with bitcoin’s original idea of digital cash. Overall, the chapter provides a basic understanding of cryptocurrencies, their defining characteristics, challenges, and markets.
Details
Keywords
Parichat Sinlapates and Surachai Chancharat
This paper aims to investigate the effects of volatility transmission among Bitcoin and other leading cryptocurrencies, namely, Binance USD, BNB, Cardano, Dogecoin, Ethereum…
Abstract
Purpose
This paper aims to investigate the effects of volatility transmission among Bitcoin and other leading cryptocurrencies, namely, Binance USD, BNB, Cardano, Dogecoin, Ethereum, Polkadot, Polygon, Solana, Tether, USD Coin and XRP.
Design/methodology/approach
The multivariate BEKK-GARCH model is used with the daily data set from 1 January 2017 to 31 March 2023. The data set is analysed in its entirety and is also the COVID-19 epidemic period.
Findings
The study reveals that while the volatility of cryptocurrency prices is influenced by their own historical shocks and volatility, there is proof of the effects shock transmission among Bitcoin and other notable cryptocurrencies. Furthermore, the authors identify the spillover effects of volatility among all 11 pairs and provide evidence that conditional correlations with varying time constants are present, and predominantly positive for both the entire and COVID-19 outbreak periods.
Practical implications
The findings will be helpful to market experts who want to avoid losses in traditional assets. To develop the best risk management and hedging strategies, businesses might use the information to build asset portfolios or personalise payment methods. The use of such data by investors and portfolio managers could aid in the development of investment opportunities, risk insurance plans or hedging strategies for the management of financial portfolios.
Originality/value
To the best of the authors’ knowledge, the use of the BEKK-GARCH model for examining the effects of volatility spillover among Bitcoin and the other eleven top cryptocurrencies has not been previously documented.
Details
Keywords
The authors make a fundamental initial effort to conduct a systematic review analysis on “cryptocurrency,” mainly to analyze the way it has been changing the “stereotype”…
Abstract
Purpose
The authors make a fundamental initial effort to conduct a systematic review analysis on “cryptocurrency,” mainly to analyze the way it has been changing the “stereotype” financial transactions, and also identify the probable unexplored research avenues on this innovative investment regime. The study aims to draw the landscape of the current state, prospects, challenges, trends and possible agendas of cryptocurrency in the global market.
Design/methodology/approach
Using a quali-quantitative approach widely known as meta-literature review, the synthesis analysis on “cryptocurrency” is conducted. Methodologically, the authors review and analyze the most recent and relevant papers preferably published between 2016 and 2020 in leading business and finance journals of ISI Web of Science (ISI WOS) through bibliometric analysis particularly coupled with content analysis.
Findings
The findings of the meta-analysis summarize the relevant stylized facts of the cryptocurrency market: distinctive features of blockchain technology, decentralized payment method, low-cost facility, ensuring pseudo-anonymity, independence from central authority, double spending attack protection, organic and instantaneous nature, among others. In addition, the analysis identified several future research regimes: pricing model, prospect of investment regime, hedging properties, volatility dynamics, information asymmetry, underlying risk factors and bubble-like nature in global cryptocurrency market.
Practical implications
This academic novelty significantly contributes to enhance our knowledge on the current state-of-the-art of digital finance, outlines the research agenda and eventually provides important investment implications for financial managers, research analysts, investors, market practitioners, regulatory compliance professionals and policymakers. Therefore, the findings shed the lights on new investment opportunity in the global market.
Originality/value
Cryptocurrency, virtual currency or digital asset having cryptography for idiosyncratic security features, seems to be a persistent paradigm shift in the digitalized financial system. Despite the continuing growth, the academic research on cryptocurrency is still at nascent stage, particularly because researchers did not deeply draw attention at this financial innovation. In addition, the authors argue that none of the earlier studies yet conducted a meta-analysis on this latest investment regime. Therefore, this review study is the initial attempt to fill up the gap in the finance literature.
Details
Keywords
Everton Anger Cavalheiro, Kelmara Mendes Vieira and Pascal Silas Thue
This study probes the psychological interplay between investor sentiment and the returns of cryptocurrencies Bitcoin and Ethereum. Employing the Granger causality test, the…
Abstract
Purpose
This study probes the psychological interplay between investor sentiment and the returns of cryptocurrencies Bitcoin and Ethereum. Employing the Granger causality test, the authors aim to gauge how extensively the Fear and Greed Index (FGI) can predict cryptocurrency return movements, exploring the intricate bond between investor emotions and market behavior.
Design/methodology/approach
The authors used the Granger causality test to achieve research objectives. Going beyond conventional linear analysis, the authors applied Smooth Quantile Regression, scrutinizing weekly data from July 2022 to June 2023 for Bitcoin and Ethereum. The study focus was to determine if the FGI, an indicator of investor sentiment, predicts shifts in cryptocurrency returns.
Findings
The study findings underscore the profound psychological sway within cryptocurrency markets. The FGI notably predicts the returns of Bitcoin and Ethereum, underscoring the lasting connection between investor emotions and market behavior. An intriguing feedback loop between the FGI and cryptocurrency returns was identified, accentuating emotions' persistent role in shaping market dynamics. While associations between sentiment and returns were observed at specific lag periods, the nonlinear Granger causality test didn't statistically support nonlinear causality. This suggests linear interactions predominantly govern variable relationships. Cointegration tests highlighted a stable, enduring link between the returns of Bitcoin, Ethereum and the FGI over the long term.
Practical implications
Despite valuable insights, it's crucial to acknowledge our nonlinear analysis's sensitivity to methodological choices. Specifics of time series data and the chosen time frame may have influenced outcomes. Additionally, direct exploration of macroeconomic and geopolitical factors was absent, signaling opportunities for future research.
Originality/value
This study enriches theoretical understanding by illuminating causal dynamics between investor sentiment and cryptocurrency returns. Its significance lies in spotlighting the pivotal role of investor sentiment in shaping cryptocurrency market behavior. It emphasizes the importance of considering this factor when navigating investment decisions in a highly volatile, dynamic market environment.
Details
Keywords
Amit Majumder, Megnath Routh and Dipayan Singha
One of the noteworthy developments in the world economy is the cryptocurrency in general and the bitcoin in particular. Although several types of cryptocurrency are in operation…
Abstract
One of the noteworthy developments in the world economy is the cryptocurrency in general and the bitcoin in particular. Although several types of cryptocurrency are in operation in the current digital economy, the most prevalent is the bitcoin, which was launched formally in 2009 by an individual or group known under the pseudonym Satoshi Nakamoto. The value of bitcoin has increased to such an extend that it reached 19.7 billion US dollars by January 2, 2018 (Statista, 2018). As the bitcoin price touches a new high day by day, various terrorist organizations are using this cryptocurrency to anonymously finance their grotesque terrorist activities around the world by bypassing the surveillance mechanism of the banking system of the respective countries. Against this backdrop, this chapter aims to understand the mechanism of cryptocurrencies in general and the bitcoin in particular. Finally, it also endeavors to identify the trend of the bitcoin economy and its impact on nefarious activities in general and terrorism financing in particular. It has been revealed from the study that cryptocurrency economy has become so popular across the world that it has created an alternative virtual economy devoid of regulations from a specific country or a group of countries. By using vector error correction model (VECM), it had been observed that there exists a statistically significant long-run association between terrorist incidences and bitcoin transaction/circulation in the panel of 12 countries for 2010–2016. However, there is a huge concern over its way of operation and its unholy nexus with terrorism financing.
Details
Keywords
Sanshao Peng, Catherine Prentice, Syed Shams and Tapan Sarker
Given the cryptocurrency market boom in recent years, this study aims to identify the factors influencing cryptocurrency pricing and the major gaps for future research.
Abstract
Purpose
Given the cryptocurrency market boom in recent years, this study aims to identify the factors influencing cryptocurrency pricing and the major gaps for future research.
Design/methodology/approach
A systematic literature review was undertaken. Three databases, Scopus, Web of Science and EBSCOhost, were used for this review. The final analysis comprised 88 articles that met the eligibility criteria.
Findings
The influential factors were identified and categorized as supply and demand, technology, economics, market volatility, investors’ attributes and social media. This review provides a comprehensive and consolidated view of cryptocurrency pricing and maps the significant influential factors.
Originality/value
This paper is the first to systematically and comprehensively review the relevant literature on cryptocurrency to identify the factors of pricing fluctuation. This research contributes to cryptocurrency research as well as to consumer behaviors and marketing discipline in broad.
Details
Keywords
A. Can Inci and Rachel Lagasse
This study investigates the role of cryptocurrencies in enhancing the performance of portfolios constructed from traditional asset classes. Using a long sample period covering not…
Abstract
Purpose
This study investigates the role of cryptocurrencies in enhancing the performance of portfolios constructed from traditional asset classes. Using a long sample period covering not only the large value increases but also the dramatic declines during the beginning of 2018, the purpose of this paper is to provide a more complete analysis of the dynamic nature of cryptocurrencies as individual investment opportunities, and as components of optimal portfolios.
Design/methodology/approach
The mean-variance optimization technique of Merton (1990) is applied to develop the risk and return characteristics of the efficient portfolios, along with the optimal weights of the asset class components in the portfolios.
Findings
The authors provide evidence that as a single investment, the best cryptocurrency is Ripple, followed by Bitcoin and Litecoin. Furthermore, cryptocurrencies have a useful role in the optimal portfolio construction and in investments, in addition to their original purposes for which they were created. Bitcoin is the best cryptocurrency enhancing the characteristics of the optimal portfolio. Ripple and Litecoin follow in terms of their usefulness in an optimal portfolio as single cryptocurrencies. Including all these cryptocurrencies in a portfolio generates the best (most optimal) results. Contributions of the cryptocurrencies to the optimal portfolio evolve over time. Therefore, the results and conclusions of this study have no guarantee for continuation in an exact manner in the future. However, the increasing popularity and the unique characteristics of cryptocurrencies will assist their future presence in investment portfolios.
Originality/value
This is one of the first studies that examine the role of popular cryptocurrencies in enhancing a portfolio composed of traditional asset classes. The sample period is the largest that has been used in this strand of the literature, and allows to compare optimal portfolios in early/recent subsamples, and during the pre-/post-cryptocurrency crisis periods.
Details
Keywords
Azza Bejaoui, Salim Ben Sassi and Jihed Majdoub
In this paper, the authors seek to investigate the dynamics of Bitcoin, Litecoin, Ethereum and Ripple daily returns and volatilities.
Abstract
Purpose
In this paper, the authors seek to investigate the dynamics of Bitcoin, Litecoin, Ethereum and Ripple daily returns and volatilities.
Design/methodology/approach
In this paper, the authors apply the MS-ARMA model on daily returns of Bitcoin (19/04/2013-13/02/2018), Ripple (05/08/2013-14/02/2018), Litcoin (29/04/2013-14/02/2018) and Ethereum (08/02/2015-14/02/2018). This model allows capture of the nonlinear structure in both the conditional mean and the conditional variance of cryptocurrency returns.
Findings
All the cryptocurrency markets show regime switching in the return-generating process. Market dynamics seem to be governed by two different states which differ from one cryptocurrency market to another in terms of mean return, volatility and interstate dynamics. These findings can be explained by investors’ behavior, i.e. speculative trading and herding behavior. By choosing to participate (or imitating some investors) in some cryptocurrency markets (in particular Bitcoin market), they affect the price movements and therefore the market dynamics in the short run.
Practical implications
Identifying the different market states provides information for investors to make more accurate portfolio decisions in the virtual market and follow the market timing strategy.
Originality/value
This paper attempts to analyze potential nonlinear structure in cryptocurrencies returns and analyze if there is a difference between the cryptocurrencies market cycles. So, the search for congruent and adequate specification to reproduce the stock returns dynamics in the virtual market still remains the concern of several empirical studies. This research not only examines the behavior of stock returns in the cryptocurrencies’ market but also highlights the existence of nonlinearity propriety as a stylized fact.
Details
Keywords
Ahmed Jeribi and Achraf Ghorbel
The purpose of this paper is threefold. First, it models and forecasts the risk of the five leading cryptocurrencies, stock market indices (developed and BRICS) and gold returns…
Abstract
Purpose
The purpose of this paper is threefold. First, it models and forecasts the risk of the five leading cryptocurrencies, stock market indices (developed and BRICS) and gold returns. Second, it conducts different backtesting procedures forecasts. Third, it focuses on the hedging potential of cryptocurrencies and gold.
Design/methodology/approach
The authors used the generalized autoregressive score (GAS) models to model and forecast the risk of cryptocurrencies, stock market indices and gold returns. They conduct different backtesting procedures of the 1% and 5%-value-at-risk (VaR) forecasts. They also use the generalized orthogonal generalized autoregressive conditional heteroskedasticity (GO-GARCH) model to explore the hedging potential of cryptocurrencies by estimating the dynamic conditional correlation between cryptocurrencies and gold, on the one hand, and stock markets on the other hand.
Findings
When conducting different backtesting procedures of VaR, our finding suggests that Bitcoin has the highest VaR among cryptocurrencies and Gold and the BRICS indices returns have lower VaR compared to the developed countries. Finally, we provide evidence that the risks among developed stock markets can be hedged by Bitcoin and Gold. Bitcoin can be considered as the new Gold for these economies. Unlike Bitcoin, Gold can be considered as a hedge for Chinese and Indian investors. However, Gold and Bitcoin can be considered as diversifier assets for the other BRICS economies while Dash and Monero are diversifier assets for developed stock markets.
Originality/value
The first paper's empirical contribution lies in analyzing optimal forecast models for cryptocurrencies (other than Bitcoin) returns and risk. The second contribution consists of studying the hedging potential of five leading cryptocurrencies. To the best of our knowledge, no previous studies have investigated the role of cryptocurrencies for BRICS investors.
Details
Keywords
Fatma Ben Hamadou, Taicir Mezghani, Ramzi Zouari and Mouna Boujelbène-Abbes
This study aims to assess the predictive performance of various factors on Bitcoin returns, used for the development of a robust forecasting support decision model using machine…
Abstract
Purpose
This study aims to assess the predictive performance of various factors on Bitcoin returns, used for the development of a robust forecasting support decision model using machine learning techniques, before and during the COVID-19 pandemic. More specifically, the authors investigate the impact of the investor's sentiment on forecasting the Bitcoin returns.
Design/methodology/approach
This method uses feature selection techniques to assess the predictive performance of the different factors on the Bitcoin returns. Subsequently, the authors developed a forecasting model for the Bitcoin returns by evaluating the accuracy of three machine learning models, namely the one-dimensional convolutional neural network (1D-CNN), the bidirectional deep learning long short-term memory (BLSTM) neural networks and the support vector machine model.
Findings
The findings shed light on the importance of the investor's sentiment in enhancing the accuracy of the return forecasts. Furthermore, the investor's sentiment, the economic policy uncertainty (EPU), gold and the financial stress index (FSI) are the top best determinants before the COVID-19 outbreak. However, there was a significant decrease in the importance of financial uncertainty (FSI and EPU) during the COVID-19 pandemic, proving that investors attach much more importance to the sentimental side than to the traditional uncertainty factors. Regarding the forecasting model accuracy, the authors found that the 1D-CNN model showed the lowest prediction error before and during the COVID-19 and outperformed the other models. Therefore, it represents the best-performing algorithm among its tested counterparts, while the BLSTM is the least accurate model.
Practical implications
Moreover, this study contributes to a better understanding relevant for investors and policymakers to better forecast the returns based on a forecasting model, which can be used as a decision-making support tool. Therefore, the obtained results can drive the investors to uncover potential determinants, which forecast the Bitcoin returns. It actually gives more weight to the sentiment rather than financial uncertainties factors during the pandemic crisis.
Originality/value
To the authors’ knowledge, this is the first study to have attempted to construct a novel crypto sentiment measure and use it to develop a Bitcoin forecasting model. In fact, the development of a robust forecasting model, using machine learning techniques, offers a practical value as a decision-making support tool for investment strategies and policy formulation.
Details