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Peer Co-Movement in Crypto Markets
Peer Co-Movement in Crypto Markets G. Schwenkler and H. Zheng∗ February 4, 2021y Abstract We show that peer linkages induce significant price co-movement in crypto markets in excess of common risk factors and correlated demand shocks. When large abnormal return shocks hit one crypto, its peers experience unusually large abnormal returns of the opposite sign. These effects are primarily concentrated among smaller peers and revert after several weeks, resulting in predictable returns. We develop trading strategies that exploit this rever- sal, and show that they are profitable even after accounting for trading fees and frictions. We establish our results by identifying crypto peers through co-mentions in online news using novel natural language processing technologies. Keywords: Cryptocurrencies, peers, co-movement, competition, natural language pro- cessing. JEL codes: G12, G14, C82. ∗Schwenkler is at the Department of Finance, Santa Clara University Leavey School of Business. Zheng is at the Department of Finance, Boston University Questrom School of Business. Schwenkler is corresponding author. Email: [email protected], web: http://www.gustavo-schwenkler.com. yThis is a revision of a previous paper by the two authors called \Competition or Contagion: Evidence from Cryptocurrency Markets." We are grateful to Jawad Addoum (discussant), Daniele Bianchi (discussant), Will Cong, Tony Cookson, Sanjiv Das, Seoyoung Kim, Andreas Neuhierl, Farzad Saidi, and Antoinette Schoar, seminar participants at Boston University and the Society for Financial Econometrics, and the participants at the 2020 Finance in the Cloud III Virtual Conference, the 2020 MFA Annual Meeting, the 3rd UWA Blockchain, Cryptocurrency and FinTech Conference, and the 2020 INFORMS Annual Meeting for useful comments and suggestions. -
The Magnificent Seven
The Magnificent Seven A closer look at functional attributes of blockchain platforms The Magnificent Seven1 Following a whitepaper published in late 2008, the Bitcoin system came into being in 2009, and the underlying technology became what we refer to as Blockchain today. 1 The top seven cryptocurrencies covered a good variety of attributes that are essential to gain a more thorough understanding of the potentials offered by this new technology. The Magnificent Seven 1 Since then, a variety of different cryptocurrency platforms have been created, and based on data from CoinMarketCap (https://coinmarketcap.com/), as of 27 March 2021, there were 8,964 crypto tokens in existence, with a total Market Cap of over USD$1.6 Trillion. The top seven cryptocurrencies made up around 80% of the global market capitalisation: Market Cap Token Symbol (billion USD) % Bitcoin BTC 1,026.8 59.23 Ethereum ETH 0,196.2 11.32 Cardano ADA 0,040.2 02.32 Binance Coin BNB 0,039.1 02.25 Tether USDT 0,038.5 02.22 Polkadot DOT 0,030.4 01.75 XRP XRP 0,025.8 01.49 80.58 Rest of 8,957 tokens 19.42 Bitcoin alone represents nearly 60% of the total cryptocurrency value, with Ethereum being the second highest by value. However, these cryptocurrencies are not in fact the same: value aside, they differ in some interesting ways, which in turn affect their “function” and value proposition. Asset Smart Token Year Type Minable Consensus2 Limit Backed Contract BTC 2009 Native Yes POW No 21m ETH 2012 ERC-20 Yes / No3 POW | POS No Y none ADA 2017 Native No POS No Y 45bn BNB 2017 ERC-20 No Tendermint No 100m Multiple Forms: USDT-Omni, USDT 2014 USDT-TRON, No NA USD none USDT-ERC20 and USDT-EOS DOT 2017 Native NPOS No Y none Ripple XRP 2012 Native No Transaction No 100bn Protocol Source: https://icorating.com/ and https://coincodex.com/ 2 In simple terms, consensus mechanism is a means of authenticating and validating transactions on a Blockchain (or distributed ledger) without having to trust or rely on a central authority. -
CASP) Software-Only, Ledger Agnostic, Platform Agnostic, Crypto Agile Bank-Grade Security for Crypto Assets
Protect Your Crypto Assets with Unbound’s Crypto Assets Security Platform (CASP) Software-Only, Ledger Agnostic, Platform Agnostic, Crypto Agile Bank-Grade Security for Crypto Assets Mathematically proven security Cryptography is one of the foundational security elements used by guarantee – the key material never organizations to protect sensitive data, transactions, services and identities. exists in the clear throughout its At the core of any cryptography implementation is the management of lifecycle including creation, in-use cryptographic keys and their protection from compromise and misuse. and at-rest With crypto assets, the protection of private keys is top priority, since the Any currency, any ledger, any private key is used to sign each transaction. It is therefore mandatory platform, any client to keep the key secure – not only from compromise, but also from any Programmatically derived malicious usage – as it takes only one fraudulent transaction (i.e. a single sign addresses (BIP 32/44) that are operation, to empty a wallet). cryptographically protected Backed by proven mathematical guarantees of security, Unbound’s Crypto Stronger and more flexible than Asset Security Platform (CASP) provides its customers with a software-only multi-signature – ledger-agnostic support of flexible quorum security platform that is as safe as hardware. With CASP, one can fully manage structures, any number of human the keys’ lifecycle, define cryptographically-based approval policies, while and/or servers, internal and supporting any currency, any ledger, any platform and any client type. external, that are required to sign a transaction Any Currency, Any Ledger, Any Platform Infinite scalability – easily scale capacity when and where it is Traditionally, securing the keys and secrets that guard the organizations’ most needed valuable assets required the use of dedicated hardware, such as hardware Intuitive and easy to use SDK – security modules (HSMs) and smartcards. -
Linking Wallets and Deanonymizing Transactions in the Ripple Network
Proceedings on Privacy Enhancing Technologies ; 2016 (4):436–453 Pedro Moreno-Sanchez*, Muhammad Bilal Zafar, and Aniket Kate* Listening to Whispers of Ripple: Linking Wallets and Deanonymizing Transactions in the Ripple Network Abstract: The decentralized I owe you (IOU) transac- 1 Introduction tion network Ripple is gaining prominence as a fast, low- cost and efficient method for performing same and cross- In recent years, we have observed a rather unexpected currency payments. Ripple keeps track of IOU credit its growth of IOU transaction networks such as Ripple [36, users have granted to their business partners or friends, 40]. Its pseudonymous nature, ability to perform multi- and settles transactions between two connected Ripple currency transactions across the globe in a matter of wallets by appropriately changing credit values on the seconds, and potential to monetize everything [15] re- connecting paths. Similar to cryptocurrencies such as gardless of jurisdiction have been pivotal to their suc- Bitcoin, while the ownership of the wallets is implicitly cess so far. In a transaction network [54, 55, 59] such as pseudonymous in Ripple, IOU credit links and transac- Ripple [10], users express trust in each other in terms tion flows between wallets are publicly available in an on- of I Owe You (IOU) credit they are willing to extend line ledger. In this paper, we present the first thorough each other. This online approach allows transactions in study that analyzes this globally visible log and charac- fiat money, cryptocurrencies (e.g., bitcoin1) and user- terizes the privacy issues with the current Ripple net- defined currencies, and improves on some of the cur- work. -
User Manual Ledger Nano S
User Manual Ledger Nano S Version control 4 Check if device is genuine 6 Buy from an official Ledger reseller 6 Check the box contents 6 Check the Recovery sheet came blank 7 Check the device is not preconfigured 8 Check authenticity with Ledger applications 9 Summary 9 Learn more 9 Initialize your device 10 Before you start 10 Start initialization 10 Choose a PIN code 10 Save your recovery phrase 11 Next steps 11 Update the Ledger Nano S firmware 12 Before you start 12 Step by step instructions 12 Restore a configuration 18 Before you start 19 Start restoration 19 Choose a PIN code 19 Enter recovery phrase 20 If your recovery phrase is not valid 20 Next steps 21 Optimize your account security 21 Secure your PIN code 21 Secure your 24-word recovery phrase 21 Learn more 22 Discover our security layers 22 Send and receive crypto assets 24 List of supported applications 26 Applications on your Nano S 26 Ledger Applications on your computer 27 Third-Party applications on your computer 27 If a transaction has two outputs 29 Receive mining proceeds 29 Receiving a large amount of small transactions is troublesome 29 In case you received a large amount of small payments 30 Prevent problems by batching small transactions 30 Set up and use Electrum 30 Set up your device with EtherDelta 34 Connect with Radar Relay 36 Check the firmware version 37 A new Ledger Nano S 37 A Ledger Nano S in use 38 Update the firmware 38 Change the PIN code 39 Hide accounts with a passphrase 40 Advanced Passphrase options 42 How to best use the passphrase feature 43 -
GJR-GARCH Volatility Modeling Under NIG and ANN for Predicting Top Cryptocurrencies
Journal of Risk and Financial Management Article GJR-GARCH Volatility Modeling under NIG and ANN for Predicting Top Cryptocurrencies Fahad Mostafa 1,* , Pritam Saha 2, Mohammad Rafiqul Islam 3 and Nguyet Nguyen 4,* 1 Department of Mathematics and Statistics, Texas Tech University, Lubbock, TX 79409, USA 2 Rawls College of Business, Texas Tech University, Lubbock, TX 79409, USA; [email protected] 3 Department of Mathematics, Florida State University, Tallahassee, FL 32306, USA; [email protected] 4 Department of Mathematics and Statistics, Youngstown State University, Youngstown, OH 44555, USA * Correspondence: [email protected] (F.M.); [email protected] (N.N.) Abstract: Cryptocurrencies are currently traded worldwide, with hundreds of different currencies in existence and even more on the way. This study implements some statistical and machine learning approaches for cryptocurrency investments. First, we implement GJR-GARCH over the GARCH model to estimate the volatility of ten popular cryptocurrencies based on market capitalization: Bitcoin, Bitcoin Cash, Bitcoin SV, Chainlink, EOS, Ethereum, Litecoin, TETHER, Tezos, and XRP. Then, we use Monte Carlo simulations to generate the conditional variance of the cryptocurrencies using the GJR-GARCH model, and calculate the value at risk (VaR) of the simulations. We also estimate the tail-risk using VaR backtesting. Finally, we use an artificial neural network (ANN) for predicting the prices of the ten cryptocurrencies. The graphical analysis and mean square errors (MSEs) from the ANN models confirmed that the predicted prices are close to the market prices. For some cryptocurrencies, the ANN models perform better than traditional ARIMA models. Citation: Mostafa, Fahad, Pritam Saha, Mohammad Rafiqul Islam, and Keywords: artificial neural network; cryptocurrency; GJR-GARCH; NIG; Monte Carlo simulation; Nguyet Nguyen. -
Prism: Scaling Bitcoin by 10000
Prism: Scaling Bitcoin by 10,000× Lei Yang∗ Vivek Bagaria† Gerui Wang‡ Mohammad Alizadeh∗ David Tse† Giulia Fanti§ Pramod Viswanath‡ ABSTRACT and throughput in the blockchain (§4). A recent theoretical paper Bitcoin is the first fully-decentralized permissionless blockchain described the core protocol and analyzed its security properties [6]. protocol to achieve a high level of security: the ledger it maintains While these theoretical results are promising, it is not clear has guaranteed liveness and consistency properties as long as the ad- how well they can translate into real-world performance. First, the versary has less compute power than the honest nodes. However, its Prism consensus protocol is much more complex than the longest throughput is only 7 transactions per second and the confirmation chain protocol: clients must maintain over 1000 distinct blockchains, latency can be up to hours. Prism is a new blockchain protocol that is which refer to each other to create an intricate directed acyclic graph designed to achieve a natural scaling of Bitcoin’s performance while (DAG) structure, and they must process blocks at very high rates maintaining its full security guarantees. We present an implementa- (e.g., 100-1000s of blocks per second at 100s of Mbps) to update these tion of Prism that achieves a throughput of over 70;000 transactions blockchains and confirm transactions. Second, Prism’s theoretical per second and confirmation latency of tens of seconds on networks analysis relies on several simplifying assumptions (e.g., round-based of up to 1000 EC2 Virtual Machines. The code can be found at [5]. -
PWC and Elwood
2020 Crypto Hedge Fund Report Contents Introduction to Crypto Hedge Fund Report 3 Key Takeaways 4 Survey Data 5 Investment Data 6 Strategy Insights 6 Market Analysis 7 Assets Under Management (AuM) 8 Fund performance 9 Fees 10 Cryptocurrencies 11 Derivatives and Leverage 12 Non-Investment Data 13 Team Expertise 13 Custody and Counterparty Risk 15 Governance 16 Valuation and Fund Administration 16 Liquidity and Lock-ups 17 Legal and Regulatory 18 Tax 19 Survey Respondents 20 About PwC & Elwood 21 Introduction to Crypto Hedge Fund report In this report we provide an overview of the global crypto hedge fund landscape and offer insights into both quantitative elements (such as liquidity terms, trading of cryptocurrencies and performance) and qualitative aspects, such as best practice with respect to custody and governance. By sharing these insights with the broader crypto industry, our goal is to encourage the adoption of sound practices by market participants as the ecosystem matures. The data contained in this report comes from research that was conducted in Q1 2020 across the largest global crypto hedge funds by assets under management (AuM). This report specifically focuses on crypto hedge funds and excludes data from crypto index/tracking/passive funds and crypto venture capital funds. 3 | 2020 Crypto Hedge Fund Report Key Takeaways: Size of the Market and AuM: Performance and Fees: • We estimate that the total AuM of crypto hedge funds • The median crypto hedge fund returned +30% in 2019 (vs - globally increased to over US$2 billion in 2019 from US$1 46% in 2018). billion the previous year. -
OCC Interpretive Letter 1174: DLT and Stable Coins
OCC interpretive letter 1174: DLT and stable coins Author: Ousmène Jacques Mandeng, Senior Advisor, Blockchain and Multiparty Systems, Accenture Table of Contents OCC interpretive letter 1174: DLT and stable coins .................................................. 2 OCC’s position on DLT and stable coins ................................................................. 2 DLT-platforms .......................................................................................................... 3 Tokens ..................................................................................................................... 4 Stable coins ............................................................................................................. 4 Token payments ...................................................................................................... 5 Token networks ....................................................................................................... 5 Bank balance sheet tokenization ............................................................................ 6 Next steps ................................................................................................................. 7 Copyright © 2021 Accenture. All rights reserved. 1 United States OCC interpretive letter 1174: DLT and stable coins The United States Office of the Comptroller of the Currency (OCC), a federal supervisor of national banks and cooperative banks, issued new general guidance about stable coins and distributed ledger technology (DLT) -
Prospectus, Which Is in the Swedish-Language, and Which Was Approved by the Swedish Financial Supervisory Authority on 17 May 2019
NB: This English-language document is an unofficial translation of XBT Provider AB's base prospectus, which is in the Swedish-language, and which was approved by the Swedish Financial Supervisory Authority on 17 May 2019. In the case of any discrepancies between the base prospectus and this English translation, the Swedish-language base prospectus shall prevail. BASE PROSPECTUS Dated 17 May 2019 for the issuance of BITCOIN TRACKER CERTIFICATES, BITCOIN CASH TRACKER CERTIFICATES, ETHEREUM TRACKER CERTIFICATES, ETHEREUM CLASSIC TRACKER CERTIFICATES, LITECOIN TRACKER CERTIFICATES, XRP TRACKER CERTIFICATES, NEO TRACKER CERTIFICATES & BASKET CERTIFICATES under the Issuance programme of XBT Provider AB (publ) (a limited liability company incorporated under the laws of Sweden) The Certificates are guaranteed by CoinShares (Jersey) Limited ______________________________________ IMPORTANT INFORMATION This base prospectus (the "Base Prospectus") contains information relating to Certificates (as defined below) to be issued under the programme (the "Programme"). Under the Base Prospectus, XBT Provider AB (publ) (the "Issuer" or "XBT Provider") may, from time to time, issue Certificates and apply for such Certificates to be admitted to trading on one or more regulated markets or multilateral trading facilities ("MTF’s") in Finland, Germany, the Netherlands, Norway, Sweden, the United Kingdom or, subject to completion of relevant notification measures, any other Member State within the European Economic Area ("EEA"). The correct performance of the Issuer's payment obligations regarding the Certificates under the Programme are guaranteed by CoinShares (Jersey) Limited (the "Guarantor"). The Certificates are not principal-protected and do not bear interest. Consequently, the value of, and any amounts payable under, the Certificates will be strongly influenced by the performance of the Tracked Digital Currencies (as defined herein) and, unless the certificates are denominated in USD, the USD-SEK exchange rate or, as the case may be, the USD-EUR exchange rate. -
Cryptocurrency: the Economics of Money and Selected Policy Issues
Cryptocurrency: The Economics of Money and Selected Policy Issues Updated April 9, 2020 Congressional Research Service https://crsreports.congress.gov R45427 SUMMARY R45427 Cryptocurrency: The Economics of Money and April 9, 2020 Selected Policy Issues David W. Perkins Cryptocurrencies are digital money in electronic payment systems that generally do not require Specialist in government backing or the involvement of an intermediary, such as a bank. Instead, users of the Macroeconomic Policy system validate payments using certain protocols. Since the 2008 invention of the first cryptocurrency, Bitcoin, cryptocurrencies have proliferated. In recent years, they experienced a rapid increase and subsequent decrease in value. One estimate found that, as of March 2020, there were more than 5,100 different cryptocurrencies worth about $231 billion. Given this rapid growth and volatility, cryptocurrencies have drawn the attention of the public and policymakers. A particularly notable feature of cryptocurrencies is their potential to act as an alternative form of money. Historically, money has either had intrinsic value or derived value from government decree. Using money electronically generally has involved using the private ledgers and systems of at least one trusted intermediary. Cryptocurrencies, by contrast, generally employ user agreement, a network of users, and cryptographic protocols to achieve valid transfers of value. Cryptocurrency users typically use a pseudonymous address to identify each other and a passcode or private key to make changes to a public ledger in order to transfer value between accounts. Other computers in the network validate these transfers. Through this use of blockchain technology, cryptocurrency systems protect their public ledgers of accounts against manipulation, so that users can only send cryptocurrency to which they have access, thus allowing users to make valid transfers without a centralized, trusted intermediary. -
Crypto Garage Developed and Executed the Contract of a P2P
April 19, 2019 Crypto Garage, Inc. NEWS RELEASE Crypto Garage Developed and Executed the Contract of a P2P Protocol Based Crypto Asset Derivative Settled in Bitcoin 〜Executed First Derivative Contract with Blockstream〜 Crypto Garage, Inc. (HQ: Tokyo; Representative Director: Masahito Okuma; Crypto Garage), a Fintech company developing blockchain financial services and also a subsidiary of Digital Garage, Inc. (TSE first section: 4819; HQ: Tokyo; Representative Director, President Executive Officer and Group CEO: Kaoru Hayashi; DG) developed a peer-to- peer crypto asset derivative contract protocol and executed a contract based on this protocol on the Bitcoin Blockchain. Blockstream Corporation (HQ: Victoria Canada; CEO: Adam Back; Blockstream), the global leader in blockchain technology and financial cryptography, and Crypto Garage entered into a derivative contract that locks the future Bitcoin price [on a collared basis] in order to hedge the Bitcoin price fluctuation risk against the US dollar. Crypto Garage developed a P2P derivative technology based on the Discreet Log Contracts (https://dci.mit.edu/smart-contracts) that Thaddeus Dryja from MIT Digital Currency Initiatives proposed. This contract is a smart contract applied on the Bitcoin Blockchain and requires the agreement and posting of collateral by both parties. The agreed terms and collateral are defined on the Bitcoin Blockchain. Since settlement is cryptographically secured, this contract minimizes counterparty risk, such as breach of contract and other contract termination events. Contact: Hiroshi Ikemoto, Leo Shiraishi, Corporate Communication Dept., Digital Garage, Inc. Email: [email protected], TEL: +81-3-6367-1101 April 19, 2019 Crypto Garage, Inc. NEWS RELEASE The bitcoin price for the maturity date is determined by the ICE Cryptocurrency Data Feed, as agreed upon by both parties in advance.