Does Bitcoin Follow the Market Conditions Anymore?
Abstract
Recent research on the economics of digitization investigates the dramatic changes in markets by digital technology. Digital technology has caused significant differences in in the cost of storage, computation, and transmission of data. As one of the latest sign of digitization in our life, the use of cryptocurrencies has been drawing attention of all market players. Blockchain technology is recently reallocating resources, restructuring of routines, changing market relationships and patterns of the flow of goods and services. This study investigates the coherence of Bitcoin with the movements of the main indicators of different markets. Aim of this research is to clarify whether this cryptocurrency follows the market conditions or not. Because the movements of the market values of Bitcoin are aimed to be investigated to show that they can be used separately as a tool of risk management. For this reason, wavelet analysis has been employed to define cross-correlation between time series of the daily USD value of Bitcoin and some market indicators. Some literature asserts that Bitcoin has recently started to follow market conditions. If Bitcoin process follows the market conditions more than before, that if This analysis will explain if there is a change in hedging possibility of Bitcoin recently.
References
[2] Bouoiyour, J., Selmi, R. 2016. Bitcoin: A beginning of a new phase? Economic Bulletin, 36 (3): 1430–1440. Available at: http://www.accessecon.com/Pubs/EB/2016/Volume36/EB16-V36-I3-P142.pdf
[3] Dyhrberg, A.H. 2016b. Hedging capabilities of Bitcoin. Is it the virtual gold? Finance Research Letters, 16: 139–144. Available at: https://doi-org.lcproxy.shu.ac.uk/10.1016/j.frl.2015.10. 025
[4] Glaser, F., Zimmarmann, K., Haferhorn, M., Weber, M.C., Siering, M. 2014. Bitcoin - Asset or currency? Revealing users’ hidden intentions. Twenty Second European Conference on Information Systems, ECIS 2014, Tel Aviv, 1–14 pp. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2425247
[5] Grinberg, R. 2011. Bitcoin: An innovative alternative digital currency. Hastings Science and Technology Law Journal, 4: 160–211. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1817857
[6] Grinsted, A, Moore, J.C, Jevrejeva, S. 2004. Application of the cross wavelet transform and wavelet coherence to geophysical time series. Non-linear Processes in Geophysics, 11: 561–566.
[7] Gronwald, M. 2014. The economics of Bitcoins - Market characteristics and price jumps. Center for Economic Studies and Ifo Institute, Working Paper Series No. 5121, 12 pp. CESifo Group Munich. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2548999
[8] Torrence, C., and Webster, P.J. 1999. Interdecadal changes in the ensomonsoon system. Journal of Climate, 12(8): 2679–2690.
[9] Urquhart, A. 2016. The inefficiency of Bitcoin. Economics Letter, 148: 80–82. Available at: http: //dx.doi.org/10.1016/j.econlet.2016.09.019
*** www.coinmarketcap.com (accesed 31.12.2017)
The Copyright Transfer Form to ASERS Publishing (The Publisher)
This form refers to the manuscript, which an author(s) was accepted for publication and was signed by all the authors.
The undersigned Author(s) of the above-mentioned Paper here transfer any and all copyright-rights in and to The Paper to The Publisher. The Author(s) warrants that The Paper is based on their original work and that the undersigned has the power and authority to make and execute this assignment. It is the author's responsibility to obtain written permission to quote material that has been previously published in any form. The Publisher recognizes the retained rights noted below and grants to the above authors and employers for whom the work performed royalty-free permission to reuse their materials below. Authors may reuse all or portions of the above Paper in other works, excepting the publication of the paper in the same form. Authors may reproduce or authorize others to reproduce the above Paper for the Author's personal use or for internal company use, provided that the source and The Publisher copyright notice are mentioned, that the copies are not used in any way that implies The Publisher endorsement of a product or service of an employer, and that the copies are not offered for sale as such. Authors are permitted to grant third party requests for reprinting, republishing or other types of reuse. The Authors may make limited distribution of all or portions of the above Paper prior to publication if they inform The Publisher of the nature and extent of such limited distribution prior there to. Authors retain all proprietary rights in any process, procedure, or article of manufacture described in The Paper. This agreement becomes null and void if and only if the above paper is not accepted and published by The Publisher, or is with drawn by the author(s) before acceptance by the Publisher.