Negative bubbles and shocks in cryptocurrency markets

Fry, John; Cheah, Eng-Tuck

Abstract

In this paper we draw upon the close relationship between statistical physics and mathematical finance to develop a suite of models for financial bubbles and crashes. The derived models allow for a probabilistic and statistical formulation of econophysics models closely linked to mainstream financial models. Applications include monitoring the stability of financial systems and the subsequent policy implications. We emphasise the timeliness of our contribution with an application to the two largest cryptocurrency markets: Bitcoin and Ripple. Results shed new light on emerging debates over the nature of cryptocurrency markets and competition between rival digital currencies.

Citation

Fry, J., & Cheah, E. (2016). Negative bubbles and shocks in cryptocurrency markets. International review of financial analysis, 47, 343-352. https://doi.org/10.1016/j.irfa.2016.02.008

• Journal Article Type: Article
• Acceptance Date: Feb 10, 2016
• Online Publication Date: Feb 17, 2016
• Publication Date: 2016-10
• Deposit Date: Feb 4, 2022
• Journal: International review of financial analysis
• Print ISSN: 1057-5219
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 47
• Pages: 343-352
• DOI: https://doi.org/10.1016/j.irfa.2016.02.008
• Keywords: Bitcoin; Ripple; Cryptocurrencies; Bubbles; Negative bubbles; Econophysics
• Public URL: https://hull-repository.worktribe.com/output/3921028
• Related Public URLs: https://bradscholars.brad.ac.uk/handle/10454/17641