Anchoring the value of cryptocurrency

A decade long thrive of cryptocurrency has shown its potential as a source of alternative-finance and the security and the robustness of the underpinning blockchain technology. However, most cryptocurrencies fail to show inimitability and their meanings in the real world. As a result, they usually start off as favourites but quickly become the outcasts of the digital asset market. The blockchain society attempts to anchor the value of cryptocurrency with real values by employing smart contracts and link it with computation resources and the digital-productivity that have value and demands in the real world. But their attempts have some undesirable effects due to a limited number of practical applications. This limitation is caused by the dilemma between high performance and decentralisation (universal joinability). The emerging of blockchain sharding models, however, has offered a possible solution to address this dilemma. In this paper, we explore a financial model for blockchain sharding that will build an active link between the value of cryptocurrency and computation resources as well as the market and labour behaviours. Our model can adjust the price of resources and the compensation for maintaining a system based on those behaviours. We anchor the value of cryptocurrency by the amount of computation resources participated in and give the cryptocurrency a meaning as the exchange between computation resources globally. Finally, we present a working example which, through financial regularities, regulates the behaviour of anonymous participants, also incents/discourages participation dynamically

Influence of anchoring bias on Bitcoin investors’ trading decisions

Blockchain has been perceived by many professionals as the next revolution of humankind. Its application spreads across multiple industries and aspects of life, but the first impact was to be found in finance. In 2017, cryptocurrency became a new financial phenomenon around the globe when Bitcoin’s value skyrocketed to the peak of $19.535. Many investors, both professional and amateur, have taken part in this modern trend of trading. Unfortunately, a number of those experienced losses due to various reasons. Among which a prominent heuristic called “anchoring” might be one of the causes of incorrect assessment leading to potential damages. Several studies in the past have validated the existence of anchoring bias in conventional stock market. However, current literature failed to address similar effect in cryptocurrency market. This thesis examines the presence of Bitcoin price anchoring in trading decisions of investors. Order dataset, including bids and asks, were collected from Kraken exchange to serve the analysis purpose. The analysis has confirmed that investors’ trading decisions anchored to changes in Bitcoin market price. Furthermore, the result tells that anchoring bias influenced investors’ valuation of price differently when they placed bid or ask orders. Nonetheless, its impact does not vary between bull and bear market situations. In conclusion, investors should be well aware of anchoring bias when making trading decisions. The heuristic can lead to both negative and positive consequences, depending on investor’s perception toward it

Existence and Time Trend of the Psychological Barrier in Bitcoin Markets: Evidence from US, Europe, Hong Kong

In this paper, we examine the existence of psychological barriers in three Bitcoin markets, Coinbase of the US, Bitstamp of Europe and Bitfinex of Hong Kong. Using barrier proximity and hump tests, we found consistent evidence for the simultaneous existence of price barriers and clustering; barriers at the 1000- and 10000-level, and clustering at the 10- and 100-level. Also, we examine, for the first time, the time-varying trends of the price barriers in the three markets by using the coefficients from the proximity tests. The overall trend of barriers seems to drop at the 1000-level barrier after the historically high price, but the 10000-level barrier appears at the same moment with sufficient magnitudes, indicating a psychological barrier jumping . This paper contributes to the literature on psychological barriers and price clustering, and also on market efficiency and market anomalies

Rational Ponzi Games in Algorithmic Stablecoin

Algorithmic stablecoins (AS) are one special type of stablecoins that are not backed by any asset (equiv. without collateral). They stand to revolutionize the way a sovereign fiat operates. As implemented, these coins are poorly stabilized in most cases, easily deviating from the price target or even falling into a catastrophic collapse (a.k.a. Death spiral), and are as a result dismissed as a Ponzi scheme. However, is this the whole picture? In this paper, we try to reveal the truth and clarify such a deceptive concept. We find that Ponzi is basically a financial protocol that pays existing investors with funds collected from new ones. Running a Ponzi, however, does not necessarily imply that any participant is in any sense losing out, as long as the game can be perpetually rolled over. Economists call such realization as a \textit{rational Ponzi game}. We thereby propose a rational model in the context of AS and draw its holding conditions. We apply the model to examine: \textit{whether or not the algorithmic stablecoin is a rational Ponzi game.} Accordingly, we discuss two types of algorithmic stablecoins (\text{Rebase} \& \text{Seigniorage shares}) and dig into the historical market performance of two impactful projects (\text{Ampleforth} \& \text{TerraUSD}, respectively) to demonstrate the effectiveness of our model.Comment: Accepted by CryptoEx@ICBC 202

In-Game Currency Design and Consumer Spending Behavior

In this decade, the gaming industry has rocketed in size and variation of possibilities. New games are seeing new monetization methods that only increasingly grow in complexity and merge digital behavior with the behavior we see in humans in the real world. An example of this would be in the rise of the importance of freemium and competitive game scenes, resulting in a shift in motivations for making in-game purchases switching from functional to non-functional. For immensely popular games such as League of Legends or Fortnite, the emphasis is more on how players can pay to express themselves rather than to gain advantages over other competitors. There has also been tremendous usage of in-game tokens in games to prompt behavior in in-game purchases. This can take place through games providing bonuses in the conversion rate between real money and their in-game purchases, creating bundles, and providing exclusive product offerings. This study dives deeper into the behavior of how people interact with in-game tokens, analyzing how the conversion rate between the home currency to the in-game token may affect the willingness to pay of gamers.https://deepblue.lib.umich.edu/bitstream/2027.42/155343/1/Justin Fang_BA 480 Written Report.pd

Central Bank digital currencies: An Agenda for future research

Central bank digital currencies are engendering concern. As understanding of CBDCs is very limited, further research is warranted which will focus not only on the economic rationale of CBDCs but also on how they will impact monetary policy transmission, financial and price stability, inflation targeting, unconventional monetary instruments, central banks as lenders of last resort, and provision of forward guidance. There are also unsettled questions regarding ethics, privacy and environmental and technological constraints. With the imminent implementation of CBDCs, it is vital to explore these issues

Perpetual Futures Pricing

Perpetual futures are contracts without expiration date in which the anchoring of the futures price to the spot price is ensured by periodic funding payments from long to short. We derive explicit expressions for the no-arbitrage price of various perpetual contracts, including linear, inverse, and quantos futures in both discrete and continuous-time. In particular, we show that the futures price is given by the risk-neutral expectation of the spot sampled at a random time that reflects the intensity of the price anchoring. Furthermore, we identify funding specifications that guarantee the coincidence of futures and spot prices, and show that for such specifications perpetual futures contracts can be replicated by dynamic trading in primitive securities

Imaginaries on ice:Sociotechnical futures of data centre development in Norway and Iceland

In 2018, Norway promoted itself as a ‘Datacentre Nation’. In terms of low cost, renewably generated sources of electricity and low ambient temperatures, Nordic countries and the data centre sector are potentially mutual beneficiaries – yet, there are also negative impacts associated with the necessary electric power production. With this as a starting point, for Norway and Iceland, we explore how data centre proponents promulgate similar techno-environmental imaginaries, but achieve differing degrees of stabilisation. To this end, we use three sources of imaginaries relating to data centre development in Iceland and Norway: those implicit in promotional imagery originating within the countries concerned; those implicit in international newspapers, as indicative of external perceptions; and those implicit in focus groups with the Norwegian and Icelandic public. We show how data centre advocates deploy visual imagery to create a promotional techno-environmental imaginary that marries nature with the digital in a symbiotic form, and we observe that this is largely consistent with the more mundane international imaginary of Norwegian data centres. For Iceland, however, the external imaginary is dominated by associations of excess energy consumption by bitcoin mining. For the publics questioned, there are multiple imaginaries of data centres, with significant notes of moral and other forms of scepticism. Looking ahead, we suggest that for long-term stabilisation of positive data centre imaginaries, conducive to investment, the capacity of Iceland and Norway to equitably supply sufficient renewable power will need to be addressed as a matter of urgency.</p