Bitcoin Behaves Similarly To Other Currencies According To New IFJ PAN Research Suggests
There are several financial and economic experts that blame virtual currencies and blockchain technology. One of them is Nouriel Roubini that has always attacked cryptocurrencies on social media, events and even in the US Senate. Although he is convinced about what he says, there is an advanced statistical analysis that shows that Bitcoin and its market are not different than those related to other fiat currencies.
When the Soviet Union fell, new financial markets started to grow around the world, including in Central and Eastern Europe. In order to understand Bitcoin and these markets, a group of experts at the Institute of Nuclear Physics of the Polish Academy of Sciences (IFJ PAN), they analysed different criteria with the intention to assess the maturity and stability of these markets.
The analysts examined Bitcoin price changes with one-minute sequences between 2012 and 2018. According to the evidence provided, in a mature market, the distribution of these gains within short enough timescales should follow an inverse cubic law.
If the first two years of data are ignored, Bitcoin was behaving in a similar way as a mature marker already in 2014. As per the analysis, in mature global markets, there is no correlation between the signs of return, and Bitcoin matches exactly to this dynamic.
At the same time, it is possible to find these time correlations in volatility clustering, which is also associated with the reluctance to change a trend and measured by the Hurst Exponent. This measure ranges between 0 and 1 in which low values are related to propensity to change the trend and high values are related to trend continuation. The Hurst Exponent for Bitcoin is around 0.5, something that is related to markets with higher reputation.
In sum, this means that the price of Bitcoin could rise or fall without taking into account the previous price move.
Additionally, the team in charge of the analysis was able to detect multifractality in the rate of return fluctuations. According to the team leader, Prof. Stanislaw Drozdz, this is the same result as mature markets show.
The U.S. Securities and Exchange Commission (SEC) has been worried about the possibility of market manipulation in cryptocurrencies. However, this study shows that there is an important degree of market maturity in virtual currencies and Bitcoin.