Cryptocurrency: History, Advantages, Disadvantages, and the Future

Cryptocurrency is a digital asset that has seen a large amount of attention within the past five years. Its origin is intriguing to some based upon its newness, yet it has invoked mysticism and skepticism in others. Bitcoin is the most recognizable currency, receiving heavy media attention. There are several other cryptocurrencies as well, less in the spotlight. Most appealing to cryptocurrency could include lack of government oversight, and increased privacy available to the consumer(s) (Bunjaku, Gjorgieva-Trajkovska, and Miteva-Kacarski, 2017, p. 37). Additional advantages include the simplicity in the start-up process, the ease of transferability, and the opportunity to have a seamless process in investing and/or exchanging monies. Cryptocurrency creates the ability to invest for some people groups that could never invest before and diversify investment portfolios (Theron and van Vuure, 2018, p. 2). While the newness of cryptocurrency certainly has been appealing for some, it also has been perceived oppositional by others. There has been concerns identified with regard to the level of trust required, an obvious and significant drawback if valid. Another identified disadvantage to cryptocurrency is its low amount of oversight and liquidity hurt for investing future. The ability for cryptocurrency to be used for illegal and/or evil activity is an ethical drawback (Nian and Chuen, 2015, p. 15). Lastly, the uncertainty of the future is a significant drawback. The future of cryptocurrency requires much economic forecasting. The new changes that cryptocurrency will bring to traditional economic institutes is an area which cryptocurrency needs to explored more. Lastly, is cryptocurrency a fad or an economic bubble

Some stylized facts of the Bitcoin market

In recent years a new type of tradable assets appeared, generically known as cryptocurrencies. Among them, the most widespread is Bitcoin. Given its novelty, this paper investigates some statistical properties of the Bitcoin market. This study compares Bitcoin and standard currencies dynamics and focuses on the analysis of returns at different time scales. We test the presence of long memory in return time series from 2011 to 2017, using transaction data from one Bitcoin platform. We compute the Hurst exponent by means of the Detrended Fluctuation Analysis method, using a sliding window in order to measure long range dependence. We detect that Hurst exponents changes significantly during the first years of existence of Bitcoin, tending to stabilize in recent times. Additionally, multiscale analysis shows a similar behavior of the Hurst exponent, implying a self-similar process.Comment: 17 pages, 6 figures. arXiv admin note: text overlap with arXiv:1605.0670

Some stylized facts of the Bitcoin market

In recent years a new type of tradable assets appeared, generically known as cryptocurrencies. Among them, the most widespread is Bitcoin. Given its novelty, this paper investigates some statistical properties of the Bitcoin market. This study compares Bitcoin and standard currencies dynamics and focuses on the analysis of returns at different time scales. We test the presence of long memory in return time series from 2011 to 2017, using transaction data from one Bitcoin platform. We compute the Hurst exponent by means of the Detrended Fluctuation Analysis method, using a sliding window in order to measure long range dependence. We detect that Hurst exponents changes significantly during the first years of existence of Bitcoin, tending to stabilize in recent times. Additionally, multiscale analysis shows a similar behavior of the Hurst exponent, implying a self-similar process.Fil: Fernández, Aurelio. Universitat Rovira I Virgili; España. Consejo Nacional de Investigaciones Científicas y Técnicas; ArgentinaFil: Basgall, María José. Universidad Nacional de la Plata. Facultad de Informatica. Instituto de Investigación En Informatica Lidi; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas; ArgentinaFil: Hasperué, Waldo. Universidad Nacional de la Plata. Facultad de Informatica. Instituto de Investigación En Informatica Lidi; Argentina. Consejo Nacional de Investigaciones Científicas y Técnicas; ArgentinaFil: Naiouf, Ricardo Marcelo. Universidad Nacional de la Plata. Facultad de Informatica. Instituto de Investigación En Informatica Lidi; Argentin

Is there any correlation between digital currency price fluctuation? Based on the DCC-GARCH and wavelet coherence analysis

The existing studies rarely reveal the reasons for the digital currency price fluctuation from the perspective of internal interaction and contagion. Therefore, to fill this research gap, this paper comprehensively adopts the dynamic conditional correlation (DCC-) GARCH model and wavelet coherence analysis (WTC) to reveal the internal correlation and formation reasons of digital currency price fluctuations. Our research has the following findings: (1) the price fluctuations of digital currency are highly related. Through the observation of the dynamic conditional correlation coefficient graph, it is found that the price fluctuations have a strong time-varying trend, manifested as a ‘contagious’ characteristic. (2) During the outbreak of COVID-19, most digital currencies have shown positive resonance in the short, medium, and long term, suggesting that the COVID-19 pandemic has increased the correlation and contagion of digital currency price fluctuations. (3) In the short term, Bitcoin is the main ‘contagious source’ of digital currency price fluctuation. But in the medium and long term, Ethereum and Ripple, which are closely related to the real economy, have a greater impact and become the new ‘contagious source’. Generally speaking, Bitcoin, Ethereum, and Ripple are the internal causes of instability in the digital currency market. Finally, based on the empirical conclusion, this paper proposes that the digital currency portfolio should be optimized to meet the investment demand; strengthen digital currency regulatory cooperation, and improve regulatory efficiency. Let the digital currency return to the ‘currency’ attribute and serve the real econom