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Weekly cryptocurrency review #13

11 Months ago

The Institute of Nuclear Physics PAN in Cracow: Bitcoin can be better than the US dollar

According to the article in the scientific journal “Chaos: An Interdisciplinary Journal of Nonlinear Science” (https://doi.org/10.1063/1.5036517), a detailed statistical analysis of the bitcoin market carried out by the Institute of Nuclear Physics of the Polish Academy of Sciences (IFJ PAN) in Cracow did not show any significant differences between its basic statistical parameters and their equivalents designated for respected financial markets.

Scientists took a particular look at the reliability and confidence aspect of bitcoin as a currency, and therefore they examined bitcoin price changes in the period from 2012 to April 2018, recorded in one-minute intervals. In the message sent to the PAP agency, the credibility of traditional currencies was commented, which seems to be a significant part of the psychological artifact resulting from the nature of their evolution: “Subconsciously, we think that once there was a material good in the money, so it is today. And yet, some time ago in terms of physicality, the traditional currencies have become the same as cryptocurrencies are from the moment of birth: a conglomeration of bits in the banking memories of computers. The actual value of the currency is currently not determined by what is behind it, but above all what is happening with the currency - that is its market “- says Stanisław Drożdż, PhD (IFJ PAN, Cracow University of Technology).

During the research on market maturity, measured by the volatility model of returns, it turned out that the bitcoin market exhibits multifractal characteristics, i.e. the rates of return are self-similar fractals, particularly well visible in the last six months. It was of the same type as for normal, mature markets, such as stock, dollar, oil and bond markets.

Professor Drożdż sums up the research results in this way: “The most important statistical parameters of the bitcoin market clearly indicate that for many months it has met all the important criteria of financial maturity. It seems that for other cryptocurrencies, a similar transformation may be expected. If it happens, the largest market in the world, the Forex market, is looking forward to a very real competition“.

IMF: the rapid growth of cryptocurrencies will certainly affect the global financial system

In the recently published report by the International Monetary Fund “World economic outlook: challenges for steady growth” one can notice an interesting caption:

“The violation of cybersecurity and cyber attacks on financial infrastructure is an additional source of risk because they can affect cross-border payment systems and disrupt the flow of goods and services. The rapid development of cryptographic assets may create new gaps in the international financial system“.

This means that due to the rapid growth of the cryptocurrency sector (almost exponential growth), the IMF underlined that this situation may create gaps in the current financial system. Cryptocurrencies, due to the fact that they are considered an alternative but valuable digital units of payment, are becoming more and more popular among hackers: “The theft of cryptocurrencies is similar to cash theft, and cryptocurrency exchanges will still be the target of hacking attacks in the long term. That is why it is important to create systems that allow you to deal with the consequences of hacker attacks“ - said Jeon Ha-jin, chairman of the Blockchain Association in South Korea.

The stock markets themselves have started to use increased security measures, even without good advice from the IMF, which consist, among other things, in ensuring funds through trusted insurance providers. In this way, cryptocurrency exchanges want to provide users with the opportunity to cover potential losses resulting from attacks.

Cryptographic markets are a relatively young branch of global financial markets and the banking sector, so the infrastructure used by cryptocurrency exchanges differs from the technologies implemented by the traditional financial sector. Nevertheless, continuous efforts to improve, expand and update the infrastructure always put the first priority in increasing the security of digital assets and marginalized risks in the global area of finance.

What is the situation in the cryptocurrency market?

The previous week in the markets was rather calm. The total market capitalization of the cryptocurrencies dropped slightly last week and currently amounts to 211 950 035 562 USD. On the other hand, the dominance of Bitcoin over other cryptocurrencies increased and now stands at 54.1%. The following two charts illustrate this situation:

(source: CoinMarketCap.com)

(source: CoinMarketCap.com)