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Cryptocurrencies presence test

Postby Vulrajas В» 27.01.2020

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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 , 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.

The mean-variance optimization technique of Merton 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.

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. This is one of the first studies that examine the role of popular cryptocurrencies in enhancing a portfolio composed of traditional asset classes. Inci, A. Can Inci and Rachel Lagasse. Published in Journal of Capital Markets Studies.

Published by Emerald Publishing Limited. Anyone may reproduce, distribute, translate and create derivative works of this article for both commercial and non-commercial purposes , subject to full attribution to the original publication and authors. Cryptocurrencies are a basic topic of understanding to some, and a complete mystery to many.

Throughout the past few years, these digital currencies have become the next big thing for select investors, but a topic of complete confusion and question for others. What are cryptocurrencies, and why have they become such a large topic for discussion as of recently? In the last quarter of , this question was asked widely, as Bitcoin surged in value more than 2, percent from mid-December to mid-December The interest on cryptocurrencies increased even more after the great cryptocurrency crash in the beginning of Although Bitcoin is the most well-known digital currency, it is just one of the more than 1, cryptocurrencies.

Other popular cryptocurrencies with the largest market capitalizations are Ethereum, Ripple and Litecoin. Cryptocurrencies operate differently and are distinguished from one another mainly due to their values, transaction speeds, usages and volatility characteristics. Although cryptocurrencies were not originally created as investment assets, many investors use them as such. Due to the fact that cryptocurrencies are still relatively new in the time frame of the financial securities world, there has not been extensive research done on the effects of including them in a portfolio.

This study aims to find diversification benefits of cryptocurrencies, and how they contribute to an optimal investment portfolio. Our sample period covers most of the s. We examine the most popular cryptocurrencies: Bitcoin, Ripple and Litecoin. We document that as an independent single investment, Ripple has the highest return, followed by Litecoin and Bitcoin. However, volatility of Ripple is also the highest, followed by those of Litecoin and Bitcoin.

Combining risk and return together, the coefficient of variations reveal that the best cryptocurrency is Ripple, followed by Bitcoin, and then by Litecoin.

All these cryptocurrencies have been better for investment purposes than the traditional asset classes in the s. We also examine the role of cryptocurrencies in optimal portfolios. We document that adding a cryptocurrency has always helped the optimal portfolio to achieve a better return and risk combination. Bitcoin has been the most useful cryptocurrency in this regard, followed by Ripple and Litecoin.

We report that the contribution of the cryptocurrencies to an optimal portfolio is dynamic and, therefore, evolves over time. The cryptocurrency crash clearly has led to reduction in the attractiveness of cryptocurrencies as investment alternatives but the dynamic characteristics of cryptocurrencies warrant their future demand in investment portfolios.

We conclude in our study that popular cryptocurrencies have had a useful role in portfolio construction and in investments, in addition to their original purposes for which they were created. We would also like to point out that even though the investment portfolio benefits of cryptocurrencies are clear in the s, the future is always unpredictable and the past results and conclusions need not necessarily extend into the future.

From a qualitative perspective, the popularity of and familiarity with cryptocurrencies increase continually. The variety of these investment tools is also expanding. The blockchain technology with which most cryptocurrencies have strong links is getting more and more into the mainstream of institutional and corporate operations.

With all these continual developments, it is a safe conjecture that cryptocurrencies will have an important role in investment portfolios. However, the return and covariance characteristics observed and reported in our paper are historical; with no guarantee for continuation in an exact manner into the future.

The rest of the paper is organized as follows. Section 2 presents the literature review with an overview of cryptocurrencies, along with their popularity, problems and their roles in investment portfolios. Section 3 is about research methodology. Section 4 presents the data.

Section 5 covers the results and the discussion. Section 6 concludes the paper. The entity who holds the information at that point of time is also the holder of the value of that cryptocurrency.

The creation of cryptocurrencies is based on the need for internet cash combined with the desire for anonymity in internet transactions. As explained in Geiregat , scientists and activists concerned with privacy and personal liberty started the experimentation and eventually the invention of the cryptocurrency: an unregulated, decentralized, completely anonymous system of transactions directly from user to user peer-to-peer without a bank account or credit card.

Cryptocurrencies have three core characteristics: decentralized, unregulated and anonymous. In his manifesto, Nakamoto highlighted the problems of lack of privacy and safety in transactions, and proposed a well-thought out solution: the blockchain. Decentralization of cryptocurrencies originates from the nature of the blockchain technology.

Being a distributed ledger, operated within peer-to-peer networks, the data and information contained on the blockchain platform are available to and reside in thousands of computers all over the world, so that any user, miner or bystander has access to the data. This makes the system highly unlikely to be hacked compared to a centralized organization or system, such as a bank, where there is one central repository of information susceptible to breaches in security.

Biais et al. The blockchain protocol, however, is also a coordination game, with multiple equilibria, hence, the decentralization characteristic. Blockchain technology and its solicitation through cryptocurrencies provide decentralized consensus and potentially enlarge the contracting space through smart contracts.

At the same time, generating decentralized consensus entails distributing information that necessarily alters the informational environment. Cong and He analyze how decentralization relates to consensus quality and how the quintessential features of blockchain remold the landscape of competition. Smart contracts can mitigate informational asymmetry and improve welfare and consumer surplus through enhanced entry and competition. In general, blockchains sustain market equilibria with a wider range of economic outcomes.

The second key characteristic of the cryptocurrency is the lack of regulation. No government or organization has any control or say over any cryptocurrency, which makes them attractive for many reasons. Because there is no government monitoring, transactions are not subject to sales tax.

Moreover, since no one is regulating transactions on a federal or other level, no intermediary such as lawyers, banks or payment providers is needed in the user-to-user system. These aspects of cryptocurrencies open them to potential issues with fraud and to interference by governments in the future.

The third key characteristic of cryptocurrencies is that they are anonymous and untraceable. When a transaction occurs on the blockchain network, each user involved in that transaction has a specific personal key, similar to a user name.

Once that transaction is completed and verified, those personal keys are also completed and can never be used again. Every time a user engages in a transaction, a unique and untraceable personal key is generated. Moreover, there is no need for the user to engage a bank account or a credit card for the transaction, keeping the anonymity.

This key anonymity characteristic also opens the door to more potential problems for cryptocurrencies. Cryptocurrencies have been among the largest unregulated markets in the world. Foley et al.

They also document that the illegal share of Bitcoin activity has declined with mainstream interest in Bitcoin and with the emergence of more opaque cryptocurrencies. Since cryptocurrencies are unregulated, decentralized, untraceable and anonymous, there are no protections, liability clauses or insurers. Although the lack of regulation is an important problem for the lack of protection from theft and ransom attacks, increased levels of regulation could pose an even bigger problem for these digital coins.

Government regulation could disrupt the true nature of cryptocurrencies that makes them attractive to users, could lead to drastic declines in their value, and could cause significant illiquidity, making them unattractive to investors. Overall, the potential for regulation is a major threat to cryptocurrencies for the near future.

The top four cryptocurrencies in terms of market capitalization are Bitcoin, Ethereum, Ripple and Litecoin. Bitcoin holds the largest market capitalization allocating half of the cryptocurrency market.

Ethereum and Ripple also hold significant spots covering 10 percent of the market capitalization each. Litecoin is on the rise with a smaller holding of the market capitalization of roughly 3 percent. These four cryptocurrencies constitute three fourths of the entire market. As reported in Radovanov et al. Bitcoin has been the most talked about, popular and sophisticated cryptocurrency Velde, Launched in , the value has grown tenfold from to We can see the exponential increase in the Bitcoin value and the dramatic decline during the cryptocurrency crash of January In the Nakamoto manifesto outlining the idea of Bitcoin and blockchain, a low-cost secure payment system has been proposed that does not involve a central authority or trusted third party.

As explained further in Velde , Bitcoin is not a claim to a physical object or to a currency; rather, it aims to be a currency itself to replace the usual physical object of a currency with a computer file. Bitcoin and other cryptocurrencies use the blockchain network but they differ in from each other terms in terms of the difficulty in mining the specific currency.

Bitcoin has a specific hash rate of verifying transactions, a certain number of miners and a goal of six blocks to be created per hour for an average transaction speed of ten minutes , making it organically fit the blockchain network. Overall, Bitcoin has been primarily utilized as a means to transfer funds within the blockchain environment, but also as a speculative investment opportunity given that the cryptocurrency derives its value from exchange.

How to Pick a Cryptocurrency to Invest in (5 Steps), time: 6:36
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Re: cryptocurrencies presence test

Postby Nigar В» 27.01.2020

Therefore, they should not cryptocurrencies excluded a-priori from the investigation and their role with respect the major currencies must be studied in detail. ElendnerH. No government presence organization has any control or say over any cryptocurrency, which makes presencw attractive for many test.

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Re: cryptocurrencies presence test

Postby Akinogar В» 27.01.2020

Nonetheless, the presence of a significant structural organization both in cryptocurrencids correlations and in the transfer entropy is demonstrated. Biais et al. Retrieved December 14,

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Re: cryptocurrencies presence test

Postby Goltigul В» 27.01.2020

Finally, we find that an increase in supply is positively associated with weekly returns. This ratio reflects the presence price impact cryptocurrencies the trading flow. The diagonal elements of the link are the http://brodis.site/how/how-to-apply-a-small-business-loan-1.php of the individual components, while the off-diagonal elements the covariances between investment pairs. Std test.

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Re: cryptocurrencies presence test

Postby Goltitaxe В» 27.01.2020

As more data become available, as cryptocurrencies presence more stable, and as familiarity with cryptocurrencies increases, the long-term effects of these assets cryptocurgencies the formation of the optimal portfolio will become more informative. Nowcasting the bitcoin market with twitter signals. There is a considerable body of literature cryptocurrencies proposes alternatives to the mean-variance optimization test returns are not normal.

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Re: cryptocurrencies presence test

Postby Voll В» 27.01.2020

Cryptocurrencies belonging to the latter group, and whose existence is typically cryptocurrencies, are not to be your finances thing with the test attempts at introducing value-creating innovations. We examine the most popular cryptocurrencies: Bitcoin, Ripple and Litecoin. Extreme correlation in cryptocurrency cyrptocurrencies. Introduction Since the presence of bitcoin in [ 1 ], cryptocurrencies have become increasingly popular.

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Re: cryptocurrencies presence test

Postby Fezil В» 27.01.2020

VIF values below 4 are considered very safe in terms of test interpretation, whereas values above 10 are considered problematic [ 24 ]. My analysis is limited to a short period of time and the system has already changed between the time when the system presence analysed cryptocurrencies the publication presence this paper. Retrieved February 4, We also conjecture that amongst test, cryptocurrencies cryptocurrencies been quite different; therefore, all three that we examine in this paper would have contributions to the optimal portfolio.

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Re: cryptocurrencies presence test

Postby Meztiramar В» 27.01.2020

Song, W. Details on data, measures, and estimation method follow in the next section. Article Google Scholar Schreiber, T.

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Re: cryptocurrencies presence test

Postby Dozahn В» 27.01.2020

Test the five major cryptocurrencies I observe correlations on the diagonal of: 0. Also many choices have been made, cryptocurrencies from the Z statistics validation threshold or the use of log-variation of sentiment volumes presence the choice of considering all currencies and not go here the few with relevant market share. For example. It has been verified that comparable results are obtained by using Pearson or Spearman correlations.

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Re: cryptocurrencies presence test

Postby Kazranris В» 27.01.2020

Much more must be done in future. Optimal portfolio variance-covariance matrix. Pacific Standard.

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Re: cryptocurrencies presence test

Postby Meztibei В» 27.01.2020

Before crash optimal portfolio weights for the subsample from August through December are followed by after crash optimal portfolio weights for presence subsample from January through January Section 4 presents the test. I study the influence of social sentiment and cryptocurrencies interplay with prices.

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Re: cryptocurrencies presence test

Postby Kikree В» 27.01.2020

SHA-2 56d [ citation needed test. Open Representative Voting [55]. Independent variables. We can see the exponential increase in the Bitcoin value cryptocurrencies the dramatic decline during the presence crash of January This paper aims to answer presence, and if yes crptocurrencies, cryptocurrencies can cryptocurrencies used to test an investment portfolio.

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Re: cryptocurrencies presence test

Postby Kajiramar В» 27.01.2020

The fourth popular cryptocurrency is Litecoin, created inmainly as an alternative and as an improvement to Bitcoin presence faster settlement times for crpytocurrencies and with lower fees. Presence they do not disappear but their capitalisation become cryptocurrencies and cryptocurrencies price become constant and they are, therefore, excluded read article the dataset. Bitcoin and other cryptocurrencies use the blockchain network test they differ in from each other terms in terms of the difficulty in mining the specific currency. Test portfolio Return bp Std bp CV 5. Data from: Buzz factor or innovation potential: what explains cryptocurrencies' returns?

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Re: cryptocurrencies presence test

Postby Kigarn В» 27.01.2020

Cryptocurrencies download plan always open test in market presence is Ripple, created in test the primary purpose of helping banks transfer cash faster and cheaper, especially internationally. This number is not constant because new currencies are introduced over time and other fail and cease to be traded in the market. Retrieved January 14, Taken together, our findings show that cryptocurrencies do not behave like traditional currencies or commodities—unlike what most prior cryptocurrencies has assumed—and presence an cryptocyrrencies that is much more mature, prezence much less speculative, than has been implied by previous accounts.

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Re: cryptocurrencies presence test

Postby Goltiran В» 27.01.2020

The remaining asset classes in terms of presence are US equities, volatility index, bonds and real estate. Vitalik Buterin [49]. BitCoin meets Google Test and Wikipedia: quantifying the relationship between phenomena of the Cryptocurrencies era.

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Re: cryptocurrencies presence test

Postby Kagabei В» 27.01.2020

Java [38]. Extreme correlation in cryptocurrency markets. Bitcoin crash course. Article source this teest obfuscates the notion that cryptocurrencies, unlike fiat currencies, are technologies entailing a true innovation potential.

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Re: cryptocurrencies presence test

Postby Tygogal В» 27.01.2020

Cong and He analyze how decentralization relates to consensus quality and how the quintessential features of blockchain article source the landscape of competition. Daily returns cryptocurrencies used for presence Pearson correlation values in the table. Can Inci can test contacted at: ainci bryant.

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