In response to Molnár and Thies (2018) demonstrating that the price data of Bitcoin contained structural breaks, we identify the optimal number of states for a Markov regime-switching (MRS) model to capture the regime heteroskedasticity of Bitcoin. We determined that the restricted 5-state MRS model provided the best goodness-of-fit scores (-AIC, -BIC, -HQIC) for the fitted sample. In addition, we found evidence of stylised characteristics in the price data of Bitcoin, namely: volatility clustering; volatility jumps; asymmetric volatility transitions; and the persistence of shocks.
The overall performance of a portfolio is the utmost measure of success for the skills of the portfolio’s manager. The Sharpe ratio and the modified Sharpe ratio have been some of the most referenced standards used in finance, to evaluate the efficiency of funds and hedge funds managers, however; such an ordering should be accompanied by proper statistical inference. In this work we examine whether Bitcoin can diversify significantly a reference portfolio composed from the five best performers of the Dow Jones Industrial Average for 2017 that is, Apple, Boeing, Caterpillar, Visa, and Walmart. The portfolios are constructed via analytical solutions in the mean-variance framework, constrained optimization for the cases of long-only and risk-parity portfolios, and an equal weight strategy. The statistical significance of the Sharpe and modified Sharpe ratios differences is examined via a variety of tests. The results indicate that Bitcoin can significantly improve only the Sharpe and modified Sharpe ratios of the minimum variance and risk-parity portfolios. On the efficient frontier, the tangent portfolios are dominated by the traditional stocks.
As of January 2018, there were 1,384 cryptocurrencies available, and the number continues to grow., The term "cryptocurrencies," for now, at least, covers Bitcoin; altcoins, which are simply coins that are variants or forks of Bitcoin when there is a change in the underlying codes; and tokens.Unlike Bitcoin and coins that operate on separate blockchains, tokens are issued and operated on top of a blockchain.Bitcoin enjoys its enviable leading role among all cryptocurrencies, and Ethereum follows Bitcoin in standing.At the present time and for convenience purposes in the confines of this article, the author will refer to Bitcoin as inclusive of other cryptocurrencies.
Bitcoin is a digital cryptocurrency that has attracted substantial interest in recent years from the general public, profit seekers, risk takers, academic practitioners, and, last but not least, economists. Although it is referred to as new, Bitcoin has existed since 2009 and is rooted in technology that goes back even farther. It was the first established cryptocurrency, with the first trade in 2010. Since 2015, Bitcoin has attracted even more attention because of its increase in value and volume of exchange. The Bitcoin system maintains a global, distributed cryptographic ledger of transactions, or blockchain, through a consensus algorithm running on hardware scattered around the world. This paper discusses the nature of cryptocurrency and blockchain, how it works, and the present status of Bitcoin blockchain in different countries around the world. The paper also includes a review of literature on Bitcoin engineering, Bitcoin as currency and the cryptocurrency system, related work on queuing theory, and work on competition and monopoly. The paper explores three possible outcomes with regard to the future prospects of Bitcoin. The various aspects of this technology are yet to be revealed in detail, but the authors hope that this simple, basic, and narrative paper will be helpful to those seeking basic references regarding this newest issue.
The appearance of cryptocurrency marks the arrival of a new unlimited global system with no intermediaries and costly intercontinental transactions. Digital money would make it possible for us to have significantly quicker and cheaper transactions, which, along with present technology, is considered inevitable in the future. This paper includes three topics and deals with the bitcoin phenomenon and its influence on economic growth. The paper presents the bitcoin technology, its advantages and some risks to which the system’s users are exposed. Bitcoin represents an exceptional technical achievement, and specific features of bitcoin present a particular challenge for its users.
Bitcoin is a cryptocurrencyand worldwide decentralizedpayment system. The network is conducted through peer-to-peertransactionsand these transactions are verified by using cryptography technology. Blockchain technology keeps the records of public distributed ledger. Bitcoins are created as a rewardfor the public who are interested to earn it known as ‘mining’.This currency can be converted into other currencies, services and products. Lately, Bitcoin has been emerging as the well-known digital currency and getting popularity all over the world for quick transition. Moreover, this cryptocurrency will be a potential financial asset for investors because of its profitable returns. The researchers perceived that there is a significant impact of Bitcoin upon traditional transaction system which influenced us to conduct this study. The purpose of this research is to remark the ways how Bitcoin challenges the traditional transaction systemand to assess the future planning structure for traditional financial institutions to compete with digital currency. Bitcoin is the profitable platform for the miners and the investors, but little bit threat for the traditional bankers and the governments. Therefore, the attitudes and ideas of people (related with Bitcoin dealings) from different background have been assessed and analyzed for this research. The authors conducted questionnaires among the people who are acquainted with both Bitcoin and traditional transaction system and tried to find out solution of research question. We used a qualitative research methodology where we conducted semi-structured interviews. The data has been analyzed based upon the interviewees’ perspective. While preparing this research paper the authors examined the previous research in this field. In addition, there are lots of scope for further research regarding Bitcoin issue, as well as the opportunities and threats for the other financial institutions. The researchers explained the suggestions for further research which might be the guidelines for the traditional financial institutions. We faced some limitations and problems from different aspects to accomplish this research paper. The researchers came to the conclusion that Bitcoin is a challengeable instrument for the traditional transaction system. However, this cryptocurrency has some unavoidable risk and the questionable image which often used to support criminal activities. As because there is no governing authority, clearing house or central bank's involvement; thus, it bears uncertainty for the Bitcoin stockholders. In this study, we have been able to deepen the knowledge and found the solution how Bitcoin affects the traditional transaction system.
During the history there have been different examples of incorporating technology into economics. Some of them include SWIFT, e-banking, mobile payments, and many more. Technology had to be commercialized and put into service of facilitating economic processes. International finances underwent the process of development too. With the globalization process national economies became more interconnected and dependent from each other. Individuals demanded a faster and more convenient way to make international payments. Internet trade is on the rise, social media rule the contemporary world, and then appears the inception of so-called crypto currencies. The most famous is Bitcoin. Where lays its place in the economic science? It looks like that Bitcoin is going towards decentralization of the monetary system known by now. The goal of this paper is to raise the awareness of the changes happening in economy and in economic science.
Bitcoin is a decentralized, pseudonymous, virtual currency which has been linked to many nefarious activities, such as money laundering, ransomware demands, and the purchase of contraband goods and services. Although it has many redeeming features such as low transaction costs, no charge-backs, and service to the world’s 2.5 billion unbanked, the public has become aware of Bitcoin through spectacular news stories of corruption and criminal activities. Techniques to investigate Bitcoin and to identify its users are therefore required to enforce laws and protect the public. This paper discusses what Bitcoin is and how it works, and explores various investigative methodologies to perform Bitcoin network analysis, transactional analysis, and wallet analysis. Finally, this paper discusses emerging issues and suggests areas for improvement with the goal of gaining general acceptance of investigative techniques for admissibility as scientific evidence in courtroom testimony.
Cryptocurrencies such as Bitcoin might revolutionize the economy through enabling peer-to-peer based transactions by abolishing the need for a trusted intermediary. As for now, Bitcoin remains to be the best recognized cryptocurrency, in particular in terms of market capitalization. However, as this paper shows, there are plenty of alternatives. This paper outlines the historical roots which have led to the creation of privately emitted, cryptography based digital currencies. Additionally, this paper discusses future possible hurdles of the development of cryptocurrencies and outlines features which might influence the success of a cryptocurrency. Insights into the beginning of cryptocurrency development are gained by analysis of the publicly available DOACC dataset. The paper does so by providing an overview of the techniques and mechanisms used by cryptocurrencies. It shows that newly created cryptocurrencies tend to be very similar in some properties in the early stages but new features and more diversity developed in more recent years. Additionally, newly created cryptocurrencies tend more and more to create a fixed number of coins before the initial announcement in order to sell these in Initial Coin Offerings. Even when the amount of premining increases over years, it remains at lower levels on the aggregate.
Digital currencies and cryptocurrencies have hesitantly started to penetrate the investors, and the next step will be the regulatory risk management framework. We examine the Value-at-Risk and Expected Shortfall properties for Bitcoin and Ethereum, using GARCH methodology and filtered historical simulation. We find the both Bitcoin and Ethereum are subject to a higher risk, therefore, to higher sufficient buffer and risk capital to cover potential losses.
The aim of this research is to explore the econometric features of Bitcoin-USD rates. Various non-Gaussian models are fitted to daily returns in order to underline the unique characteristics of Bitcoin when compared to other more traditional currencies. Market efficiency hypothesis is tested further, and the main reasons for breaches in efficiency are discussed. The main goal of the paper is to assess the presence of bubble effects in this market with customized tests able to detect the timing of various bubbles. The results show that the Bitcoin prices had two episodes of rapid inflation in 2013 and 2017.
Son günlerde ekonomi gündeminde oldukça fazla yer kaplayan Bitcoin faaliyetleri, bazı ülke- ler tarafından yasal olarak kabul edilmekte iken, Türkiye’de ise Bitcoin için tam olarak yasal bir zemin oluşturulamamıştır. Bitcoin’nin en önem- li özelliği ise, vergi cennetleri gibi kapalı bir kutu olması sebebiyle yapılan işlem miktarının belir- lenememesidir. Özellikle son günlerde Bitcoin’in oldukça değer kazanması ve Bitcoin’le yapılan iş- lemlerin kayıt altına alınamaması dolayısıyla mali kontrollerden kaçılabilmesi yatırımcılar açısından Bitcoin’i daha da değerli kılmıştır. Ayrıca Bitco- in’lerin belirli bir sayı ile sınırlı oluşu bu sanal para- yı (kripto parayı) enflasyonun etkilerinden de uzak tutmakta ve gelişmekte olan ülkelerin yerel para birimlerinin Bitcoin karşısında daha az istikrarlı ve finansal krizlere karşı dayanaksız oluşu Bitcoin’i oldukça cazip bir alternatif haline getirmiştir. Bir- çok ekonomist tarafından güven vermeyen bir yatırım ya da ödeme aracı olarak tanımlanan Bit- coin, sadece 2017 yılı içerisinde yüzde 1.700 değer kazanması sebebiyle bu söylemlerin aksine işlem hacmini gün geçtikçe katlamayı başarmıştır. Bun- dan dolayı birçok dünya ülkesi Bitcoin’i yasal bir işlem olarak kabul etme yolunu tercih etmiştir. Böylece yapılan işlemlerin kayıt altına alınabilecek olması Bitcoin ile yapılan işlemler üzerinden de vergi alınabileceği hususunu gündeme getirmiştir. Bu çalışmada, Bitcoin’in tanımına ve gelişimine, özellikleri ve işleyişine, avantaj ve dezavantajla- rına, Türkiye özelinde Bitcoin işlemlerinin vergiye tabi tutulması durumunda hangi gelir unsuru ola- rak kabul edileceği, ne şekilde vergilendirileceği ve muhasebeleştirileceğine ilişkin önerilere yer verilecektir.
This paper studies Granger Causality relations between Bitcoin and 5 stock market indexes which are Japan, Russia, South Korea, Sweden and the United States. The time-period examined is from 2013 to 2017 and all the tests are conducted based on daily data. We analyze this in three different periods, last 5 years (2013-2017), in 2017 and last 3 months of 2017. To estimate the relationship, we use unit root test and Augmented Dickey-Fuller, Lagrange Multiplier, Johansen Cointegration Test and finally Granger Causality Test. After the tests, countries have a same integrated order that exhibits a long-run relationship. In causality, except for Russia, each country has affected the Bitcoin prices and being affected in a different period, especially in the last 3 months of 2017, the impact and popularity of Bitcoin affect too much the stock market in the short-run. As a result, the causation between Bitcoin and stock market indexes shows impact statistically significant in the 2017 year. The importance of cryptocurrency and popularity not as much as hype like late 2017 in 2018, but we think that cryptocurrencies are one of the major currencies that affect economical world very deeply.
The rapid rise of cryptocurrency adoption appears to effect the ability of people to improve their lives. In this paper, the most ubiquitous cryptocurrency, Bitcoin is used to investigate effects on financial inclusion and human development. The findings in this paper show a strong positive correlation between bitcoin transactions and human development, between bitcoin transactions and financial inclusion and between financial inclusion and human development. The Bitcoin effect is identified as having a cyclical relationship on financial inclusion and human development. While the Bitcoin effect has a very positive effect on the global economy, this paper uses these results to investigate what business models are enabled through the Bitcoin effect. Cluster analysis is carried out to identify business models that are relevant to the country categories they represent. Three business models are identified from the Bitcoin effect that relate to the country categories they represent. These are miners, innovators and wallets. This paperâs contribution is in discovering and describing the key characteristics of the Bitcoin effect and the business models it generates globally.
After the introduction of Bitcoin, blockchain has made its way through numerous applications and been adopted by various communities. A number of implementations exist today providing a platform to carry on business with ease. However, it is observed the scalability of blockchain still remains an issue. Also, none of the framework can claim the ability to handle Big Data and support to perform analytics, which is an important and integral facet of current world of business. We propose HBasechainDB, a scalable blockchain-based tamper-proofed Big Data store for distributed computing. HBasechainDB adds the blockchain characteristics of immutability and decentralization to the HBase database in the Hadoop ecosystem. Linear scaling is achieved by pushing computation to the data nodes. HBasechainDB comes with inherent property of efficient big data processing as it is built on Hadoop ecosystem. HBasechainDB also makes adaptation of blockchain very easy for those organizations whose business logic are already existing on Hadoop ecosystem. HBasechainDB can be used as a tamper-proof, decentralized, distributed Big Data store.
In this paper, the price fluctuations of Bitcoin under speculative environment is studied. It has been seen that the market trend points out an existence of a speculative bubble. Over the course of the period from 2014 to 2018, the trend in price movements of bitcoin has proved to be strongly speculative. In that regard, investors might be curious about what drivers might be instrumental in these speculative price changes. After reviewing of NPV, it was seen that NPV is not applicable to the case of cryptocurrencies due to their nature and lack of free cash flows to base the asset valuation to some fundamental facts. Later, LPPL model is reviewed, however, that also proved to be insufficient since it does not reflect the investor speculations and inform much about price dynamics regarding behavioral finance principles. Then, some papers from the past price fluctuations of bitcoin (for the period from 2010 to 2013) was reviewed and three key variables were determined which might explain price movements. Public interest towards Bitcoin as interest-driven, regulatory and political news about cryptocurrencies as event-driven and VIX as overall investor approach to Bitcoin market have been taken. After running regressions, the only significant variable happened to be public interest and popularity of Bitcoin. Although, for some cases, VIX variable also explain price fluctuations for some intervals, in none of the cases event-driven variable has long- terms effect on price fluctuations under speculative environment. Lastly, a robustness test is also handled considering the “weekend effect” and it has been seen public interest variable again proved to be a significant price determinant.
Cryptocurrencies like Bitcoin have proven to be a phenomenal success. The underlying techniques hold huge promise to change the future of financial transactions, and eventually the way people and companies compute, collaborate, and interact. At the same time, the current Bitcoin-like proof-of-work based blockchain systems are facing many challenges. In more detail, a huge amount of energy/electricity is needed for maintaining the Bitcoin blockchain. In addition, their security holds if the majority of the computing power is under the control of honest players. However, this assumption has been seriously challenged recently and Bitcoin-like systems will fail when this assumption is broken. This research proposes novel blockchain designs to address the challenges. We first propose a novel blockchain protocol, called 2-hop blockchain, by combining proof-of-work and proof-of-stake mechanisms. That said, even if the adversary controls more than 50% computing power, the honest players still have the chance to defend the blockchain via honest stake. Then we revise and implement the design to obtain a practical cryptocurrency system called Twinscoin. In more detail, we introduce a new strategy for difficulty adjustment in the hybrid blockchain and provide an analysis of it. We also show how to construct a light client for proof-of-stake cryptocurrencies and evaluate the proposal practically. We implement our new design. Our implementation uses a recent modular development framework for blockchains, called Scorex. It allows us to change only certain parts of an application leaving other codebase intact.
Metcalfe's Law argues the value of a network is proportional to the square of its users. Bitcoin and other cryptocurrencies can be modeled as such: if Metcalfe's Law is true, then it is possible to forecast prices using the size of the network. I test this assertion by a cointegration test between price and an adjusted number of wallets' connections. It is stated that the series do not cointegrate, rejecting the Metcalfe's Law. A first-differences model is employed to further analyse the relation between returns and variations in the number of wallets. It is stated that Metcalfe's Law consistently predicts the trend in the value of Bitcoin; nevertheless, it is not possible to reject the reverse causation of Bitcoin returns leading to new wallets.