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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. -
Blockchain – Operator Opportunities Version 1.0 July 2018
Blockchain – Operator Opportunities Version 1.0 July 2018 About the GSMA The GSMA represents the interests of mobile operators worldwide, uniting more than 750 operators with over 350 companies in the broader mobile ecosystem, including handset and device makers, software companies, equipment providers and internet companies, as well as organisations in adjacent industry sectors. The GSMA also produces the industry-leading MWC events held annually in Barcelona, Los Angeles and Shanghai, as well as the Mobile 360 Series of regional conferences. For more information, please visit the GSMA corporate website at www.gsma.com. Follow the GSMA on Twitter: @GSMA. About the GSMA Internet Group The GSMA Internet Group (IG) is the key working group which researches, analyses and measures the potential opportunities and impacts of new web and internet technologies on mobile operator networks and platforms. We maintain the most up-to-date knowledge base of new internet and web innovations through intelligence gathering of available global research and active participation in key Standards organisations. www.gsma.com/workinggroups Authors: Peter Ajn Vanleeuwen, KPN Douwe van de Ruit, KPN Contributors: Dan Druta, AT&T Axel Nennker, Deutsche Telecom Shamit Bhat, GSMA Rinze Cats, KPN Kaissar Jabr, Monty Holding Page 2 of 36 Table of Contents Blockchain – Operator Opportunities ............................................................................ 1 Version 1.0 ............................................................................................................................... -
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. -
Bitcoin Scaling Solutions and Their Downsides by Simona Mola and Zhong Zhang (March 6, 2019, 12:35 PM EST)
Portfolio Media. Inc. | 111 West 19th Street, 5th Floor | New York, NY 10011 | www.law360.com Phone: +1 646 783 7100 | Fax: +1 646 783 7161 | [email protected] Bitcoin Scaling Solutions And Their Downsides By Simona Mola and Zhong Zhang (March 6, 2019, 12:35 PM EST) Bitcoin was designed as a decentralized monetary system and an alternative to central banking. Decentralization implies that no one can unilaterally change the way bitcoin works or its transaction history. Since Satoshi Nakamoto released the original bitcoin whitepaper in 2010,[1] reaching and maintaining decentralization has been the priority of all technological developments. To this end, bitcoin relies on its technological design: open source software, public-key cryptography, blockchain data structure, proof-of- work mining and distributed full nodes. Simona Mola However, it is well known that bitcoin has a scalability problem.[2] We have all heard at least once the comparison between bitcoin and Visa in terms of transaction capacity. That is, while Visa handles an average of 150 million transactions per day as of the end of 2018,[3] bitcoin network processes about 280,000 transactions per day.[4] This capacity is not enough to serve as a global digital medium of exchange. Bitcoin Average Transaction Fee in USD Zhong Zhang Besides the comparison with Visa, which may not be quite parallel, bitcoin’s scaling problem is reflected in its average transaction fees. In the situation of greater market demand for bitcoin transactions, the restriction of the block size to 1 MB leads to a higher average wait time before confirmation and thus greater transaction fees. -
A Survey on Volatility Fluctuations in the Decentralized Cryptocurrency Financial Assets
Journal of Risk and Financial Management Review A Survey on Volatility Fluctuations in the Decentralized Cryptocurrency Financial Assets Nikolaos A. Kyriazis Department of Economics, University of Thessaly, 38333 Volos, Greece; [email protected] Abstract: This study is an integrated survey of GARCH methodologies applications on 67 empirical papers that focus on cryptocurrencies. More sophisticated GARCH models are found to better explain the fluctuations in the volatility of cryptocurrencies. The main characteristics and the optimal approaches for modeling returns and volatility of cryptocurrencies are under scrutiny. Moreover, emphasis is placed on interconnectedness and hedging and/or diversifying abilities, measurement of profit-making and risk, efficiency and herding behavior. This leads to fruitful results and sheds light on a broad spectrum of aspects. In-depth analysis is provided of the speculative character of digital currencies and the possibility of improvement of the risk–return trade-off in investors’ portfolios. Overall, it is found that the inclusion of Bitcoin in portfolios with conventional assets could significantly improve the risk–return trade-off of investors’ decisions. Results on whether Bitcoin resembles gold are split. The same is true about whether Bitcoins volatility presents larger reactions to positive or negative shocks. Cryptocurrency markets are found not to be efficient. This study provides a roadmap for researchers and investors as well as authorities. Keywords: decentralized cryptocurrency; Bitcoin; survey; volatility modelling Citation: Kyriazis, Nikolaos A. 2021. A Survey on Volatility Fluctuations in the Decentralized Cryptocurrency Financial Assets. Journal of Risk and 1. Introduction Financial Management 14: 293. The continuing evolution of cryptocurrency markets and exchanges during the last few https://doi.org/10.3390/jrfm years has aroused sparkling interest amid academic researchers, monetary policymakers, 14070293 regulators, investors and the financial press. -
Blockchain-Interoperability.Pdf
Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Interoperability Blockchain Abstract This paper summarizes the initial exploration and findings of the World Bank Group Technology & Innovation Lab, in partnership with the IMF’s Digital Advisory Unit, on blockchain interoperability and some of the related approaches and efforts being carried out by blockchain innovators and other institutions. It covers the use cases and technical approaches of the different blockchain platforms used to exchange information and assets, as well as the experimentation the group conducted in the area of interoperability. The paper further identifies 2 interoperability issues which needs more attention and provides guidance to practitioners. Blockchain Interoperability Working Group: A Team of Technology Practitioners from the World Bank Group Information and Technology Solutions and IMF’s Digital Advisory Unit. Since 2017, the World Bank Group Technology & Innovation Lab has partnered with the IMF’s Digital Advisory Unit to explore blockchain and distributed ledger technology (DLT), including through the Learning Coin Project.1 1 https://www.ft.com/content/1cfb6d46-5d5a-11e9-939a-341f5ada9d40 WBG ITS Technology & Innovation Lab Acknowledgements WBG, Information Technology Solutions Technology and Innovation Lab (ITSTI) Yusuf Karacaoglu, Stela Mocan, Emmanuel Ayanfe Crown, Rachel Alexandra Halsema, Mahesh Chandrahas Karajgi, Han Wang, Raunak Mittal, Mert Ozdag, Ani Popiashvili WBG Information Technology Solutions, Treasury (ITSTR) Peter Z.Y. Zhou WBG Information Technology Solutions, Risk and Compliance (ITSSR) Zhijun William Zhang IBRD Legal Patricia Miranda, Menaka Kalaskar IMF Digital Advisory Herve Tourpe, Soheib Nunhuck, Chitranjan Zaroo This is a Working Paper that describe research in progress by the contributor(s) and are published to elicit comments and to encourage debate. -
Liquidity Or Leakage Plumbing Problems with Cryptocurrencies
Liquidity Or Leakage Plumbing Problems With Cryptocurrencies March 2018 Liquidity Or Leakage - Plumbing Problems With Cryptocurrencies Liquidity Or Leakage Plumbing Problems With Cryptocurrencies Rodney Greene Quantitative Risk Professional Advisor to Z/Yen Group Bob McDowall Advisor to Cardano Foundation Distributed Futures 1/60 © Z/Yen Group, 2018 Liquidity Or Leakage - Plumbing Problems With Cryptocurrencies Foreword Liquidity is the probability that an asset can be converted into an expected amount of value within an expected amount of time. Any token claiming to be ‘money’ should be very liquid. Cryptocurrencies often exhibit high price volatility and wide spreads between their buy and sell prices into fiat currencies. In other markets, such high volatility and wide spreads might indicate low liquidity, i.e. it is difficult to turn an asset into cash. Normal price falls do not increase the number of sellers but should increase the number of buyers. A liquidity hole is where price falls do not bring out buyers, but rather generate even more sellers. If cryptocurrencies fail to provide easy liquidity, then they fail as mediums of exchange, one of the principal roles of money. However, there are a number of ways of assembling a cryptocurrency and a number of parameters, such as the timing of trades, the money supply algorithm, and the assembling of blocks, that might be done in better ways to improve liquidity. This research should help policy makers look critically at what’s needed to provide good liquidity with these exciting systems. Michael Parsons FCA Chairman, Cardano Foundation, Distributed Futures 2/60 © Z/Yen Group, 2018 Liquidity Or Leakage - Plumbing Problems With Cryptocurrencies Contents Foreword .............................................................................................................. -
Blockchain, a Catalyst for New Approaches in Insurance
Blockchain, a catalyst for new approaches in insurance Thought up as the underlying architecture for the Bitcoin cryptocurrency in 2008, blockchain technology is currently a hot topic and the subject of numerous studies in sectors outside the payments industry to which it has often been confined in the past. Blockchain is considered by some to represent the next technological revolution after the Internet. In fact, the idea of a decentralised, secure and transparent ledger distributed among users can be relevant to many different fields. The insurance industry, with its highly complex processes, could be a major beneficiary of the technology. By removing intermediaries in a new type of arrangement, blockchain technology could completely upend the insurance value chain: - Development/acceleration of new products/markets for which business models were difficult to define until now. - New approaches to underwriting, contracts and claims management, particularly through a combination of smart contracts and the Internet of Things (IoT). - Overhaul of the modus operandi of insurance agreements. - New reinsurance approaches, particularly internal reinsurance via smart contracts. - Transformation of asset management with automated settlement and delivery of intangibles. Use of blockchain should help to cut acquisition, management, documentation and compliance costs. It should help new players enter the market and new markets to emerge, particularly in developing countries. By simplifying use and increasing transparency, it will also help to improve customer satisfaction. Although the upside is significant, several risks should also be anticipated. These include competition with InsurTechs, a legal framework that will need to evolve, and the challenges of rolling out the technology on a large scale. -
Facilitating Cross-Chain Cryptocurrency Exchanges: an Inquiry Into Blockchain Technology and Interoperability with an Emphasis on Cryptocurrency Arbitrage
Eastern Michigan University DigitalCommons@EMU Senior Honors Theses & Projects Honors College 2020 Facilitating cross-chain cryptocurrency exchanges: An inquiry into blockchain technology and interoperability with an emphasis on cryptocurrency arbitrage Samuel Grone Follow this and additional works at: https://commons.emich.edu/honors Part of the Computer Sciences Commons Facilitating cross-chain cryptocurrency exchanges: An inquiry into blockchain technology and interoperability with an emphasis on cryptocurrency arbitrage Abstract Since the introduction and proliferation of the blockchain-based cryptocurrency Bitcoin, alternative cryptocurrencies also based on blockchain technology have exploded in number. It was once believed that one, or very few, cryptocurrencies would eventually dominate the market and drive out competitors. This assumption, however, was incorrect. Thousands of cryptocurrencies exist concurrently. The vast number of cryptocurrencies leads to a problem—what if the cryptocurrency that an individual possesses does not meet their current needs as well as another cryptocurrency might? The attempt to solve this problem has led to the rise of many cryptocurrency exchanges and exchange schemes. In this paper, we will discuss the motivations for an individual to be interested in exchanging two or more cryptocurrencies by describing and comparing various popular cryptocurrencies with different desirable attributes. While we will discuss these attributes, this paper will give special focus to arbitrage in particular. In addition, we will describe various cryptocurrency exchange schemes and their advantages and disadvantages. Finally, we contribute to the understanding of cryptocurrency exchangeability and interoperability by comparing the historical price data of several cryptocurrencies to determine how often arbitrage has been possible in the past. Degree Type Open Access Senior Honors Thesis Department Computer Science First Advisor Weitian Tong Second Advisor S. -
The Lightning Network - Deconstructed and Evaluated
The Lightning Network - Deconstructed and Evaluated Anti-Money Laundering (AML) and Anti-Terrorist Financing (ATF) professionals, especially those working in the blockchain and cryptocurrency environment, may have heard of the second layer evolution of Bitcoin's blockchain - the Lightning Network, (LN). This exciting new and rapidly deploying technology offers innovative solutions to solve issues around the speed of transaction times using bitcoin currently, but expandable to other tokens. Potentially however, this technology raises regulatory concerns as it arguably makes, (based on current technical limitations), bitcoin transactions truly anonymous and untraceable, as opposed to its current status, where every single bitcoin can be traced all the way back to its coinbase transaction1 on the public blockchain. This article will break down the Lightning Network - analyzing how it works and how it compares to Bitcoin’s current system, the need for the technology, its money laundering (ML) and terrorist financing (TF) risks, and some thoughts on potential regulatory applications. Refresher on Blockchain Before diving into the Lightning Network, a brief refresher on how the blockchain works - specifically the Bitcoin blockchain (referred to as just “Bitcoin” with a capital “B” herein) - is required. For readers with no knowledge or those wishing to learn more about Bitcoin, Mastering Bitcoin by Andreas Antonopoulos2 is a must read, and for those wishing to make their knowledge official, the Cryptocurrency Certification Consortium, (C4) offers the Certified Bitcoin Professional (CBP) designation.3 Put simply, the blockchain is a growing list of records that can be visualized as a series of blocks linked by chains. Each block contains specific information - in Bitcoin’s case, a list of transactions and their data, which includes the time, date, amount, and the counterparties4 of each transaction. -
The Macro-Economics of Crypto-Currencies: Balancing Entrepreneurialism and Monetary Policy
ENTREPRENEURSHIP & POLICY WORKING PAPER SERIES The Macro-Economics of Crypto-Currencies: Balancing Entrepreneurialism and Monetary Policy Eli Noam In 2016, the Nasdaq Educational Foundation awarded the Columbia University School of International and Public Affairs (SIPA) a multi-year grant to support initiatives at the intersection of digital entrepreneurship and public policy. Over the past three years, SIPA has undertaken new research, introduced new pedagogy, launched student venture competitions, and convened policy forums that have engaged scholars across Columbia University as well as entrepreneurs and leaders from both the public and private sectors. New research has covered three broad areas: Cities & Innovation; Digital Innovation & Entrepreneurial Solutions; and Emerging Global Digital Policy. Specific topics have included global education technology; cryptocurrencies and the new technologies of money; the urban innovation environment, with a focus on New York City; government measures to support the digital economy in Brazil, Shenzhen, China, and India; and entrepreneurship focused on addressing misinformation. With special thanks to the Nasdaq Educational Foundation for its support of SIPA’s Entrepreneurship and Policy Initiative. Table of Contents Abstract . 1 1. Introduction . 2. 2. A History of Governmental and Private Moneys . 2 A. United States . 3 . B. Other Examples of Private Moneys . .4 . 3. The Emergence of Electronic Moneys . 5 A. Electronic Moneys . 5 B. Distributed Ledger Technology . 6. C. Blockchain Technology . 6 D. Cryptocurrencies. 8 E. An Illustration of a Bitcoin Transaction . 9 4. Advantages and Drawbacks of Crypto-Currencies . 10 A. Advantages . 10 B. Problems . 11 C. The Potential for Improvements . 15 5. The Impact of Cryptocurrencies on Macro-Economic Policy .