A research report published in the much-acclaimed scientific journal ‘Chaos: An Interdisciplinary Journal of Nonlinear Science,’ highlights some of the characteristic features of the rapidly progressing cryptocurrency industry. The report titled “Bitcoin market route to maturity?” is authored by researchers of the Henryk Niewodniczanski Institute of Nuclear Physics (IFJ PAN) of the Polish Academy of Sciences in Krakow.
The emergence of cryptocurrency was initially covered with a blanket of skepticism, especially by analysts and the public. But with the rising popularity and benefits of cryptocurrency, it is now encompassing different sectors of society.
According to the researchers, the real value of money is determined on its market value, i.e., how it is used and its market history. The report is based on 1-min price changes recorded from 2012⎯2018 and studies the fluctuation properties of the crypto market over chosen sub-periods, in terms of return distributions, volatility autocorrelation, Hurst exponents, and multi-scaling effects.
The primary objective of the report is to examine if price fluctuations are subject to the inverse cubic law (a financial theory which uses pricing specifics to measure market maturity). According to the theory, the market’s maturity can be determined by the plotting of price data points of small time frames and on the subsequent distribution of these points.
Professor Stanisław Drożdż, one of the researchers who worked on the report explained:
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“Initially, the graphs we got were a bit crooked, which did not augur anything promising. But when we took a closer look at the data, suddenly it turned out that this crookedness originated from the first two years of the analyzed period, that is, from the time when the market was just starting to shape itself. Later on, the rates of return fluctuated according to the inverse cubic law.”
The researchers, therefore, pointed out that the cryptocurrency market is witnessing economic transformation through their rapidly maturing fundamentals. Regarding Bitcoin market’s maturity, Professor Drożdż further mentioned:
“One of the more sophisticated features signaling the maturity of a market is the multifractal nature of its characteristics. In the case of Bitcoin, we detected multifractality in the functions of fluctuations in rates of return, particularly evident in the last six months of the examined period. This was of the same type as for regular, mature markets, such as the stock, dollar, oil or bond markets.”
The report added that, of late, the Bitcoin market has been showing signs of maturity by fulfilling all the required statistical parameters of a fanatically mature market. If this carries on further, the bitcoin market can pose “very real competition” to the world’s largest market ⎯ Forex.
The report concludes by saying:
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“While early trading was affected by system-specific irregularities, it is found that over the months preceding April 2018 all these statistical indicators approach the features hallmarking maturity. This can be taken as an indication that the Bitcoin market, and possibly other cryptocurrencies, carry concrete potential of imminently becoming a regular market alternative to the foreign exchange.”
