Critical dynamics related to a recent Bitcoin crash

【Author】 Zitis, Pavlos I.; Contoyiannis, Yiannis; Potirakis, Stelios M.

【Source】INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS

【影响因子】8.235

【Abstract】The cryptocurrency market is an emerging market that is characterized by intense volatility and therefore the study of its dynamics presents increased interest. The present work investigates the issue of the critical dynamics of a financial complex system approaching a crash, by using the Method of Critical Fluctuation (MCF) which is known for its ability to uncover critical dynamics. Specifically, we study the recent crash that took place in the cryptocurrency market (starting on 12 May 2021), by analyzing the "Contracts for Difference" (CFDs) prices on Bitcoin/USD (Bitcoin to US-Dollar exchange rate) at five different high frequency trading time intervals (60, 30, 15, 5 and 1 min). The results show that, for the 60-min and 30-min sampling intervals, a specific sequence of indications is identified, in agreement to the evolution towards extreme events in other complex systems, such as earthquakes. This sequence of indications isn't maintained as the sampling frequency is increased. Notably, the existence of critical dynamics during the system's evolution has been detected both in equilibrium and out-of -equilibrium by means of the same analysis method (MCF). The obtained results indicate that the MCF could provide useful information for portfolio analysis and risk management.

【Keywords】Bitcoin; Method of critical fluctuations; Criticality; Financial crashes; High-frequency data

【发表时间】2022 NOV

【收录时间】2022-10-14

【文献类型】实证数据

【主题类别】

区块链治理-市场治理-市场分析