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This dissertation investigates herd behaviour in the cryptocurrency market, following Avery & Zemsky’s (1998) information-based model of herd behaviour. More specifically, the relationship between event uncertainty and herding is considered as well as the interaction between information uncertainty, herding and price movements. The entire Bitcoin t...
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... those costumer related services constitute another set of business opportunities created by cryptocurrencies. Figure 2 provides an overview of the daily revenues of cryptocurrencies exchanges. All in all, cryptocurrencies appear to be emerging as an industry, whose members seem to enjoy quite substantial profits. ...
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... This resulted in volatile pricing and uncertain valuations. Combined with the rapid increase in media attention without a clear understanding of fundamentals, cryptocurrency mirrored the dotcom bubble (Alam et al., 2019;Leath, 2019;Lieure, 2018). However, cryptocurrency price was not pegged to any existing currency-nor it had a certain standard baseline, which led to fierce arguments and media discussion. ...
This study investigates the influence of information excess due to the increased media coverage on the price volatility of cryptocurrencies. News coverages may serve as either signals or noise in cryptocurrency markets characterized by an insufficient understanding of the fundamental value of assets and a high level of strategic complementarity. In a game-theoretic model, we show that the number of news coverages, either related or unrelated to the fundamentals, increases the price volatility of assets in a nascent financial market. We tested our hypotheses using a unique dataset of 358,118 observations of 500 cryptocurrencies and 36,572 media coverages between 2014 and 2017, the early period of cryptocurrency with the rise of public attention. The results show that cryptocurrency price volatility increases in the number of unrelated news for both major and minor coins. The volatility even increases with the number of related news in minor coins. These results have important implications for investors and entrepreneurs about the effect of misinformation in nascent markets.
... The responsibility of verifying the transaction lies on the miners. Owing to the transparency provided by the system, cryptocurrency has become an attractive investment forte [7]. ...
Traditional currencies are generally influenced by various factors including political and economic scenarios. These currencies are also dependent on regulatory institutions or government. The framework of operation for these currencies are laid by the regulators. This participation evidently increases both the cost and time involved. With the rapid acceleration of digitalization, governments and economies are opening to new advancements in technology. An alternate mechanism of cash flow involving only pear to pear transfers greatly reduces or negates interference of third parties [1]. To overcome the drawbacks of the conventional payment methods, crypto currency has been introduced. Cryptocurrency is devoid of any of the influencing or regulatory factors. The concept of blockchain enforced cryptocurrency which provides both security and anonymity has created a disruptive impact on the way business is conducted [5]. In 2008, Satoshi Nakamoto introduced bitcoin which is based on the concept of distributed blockchains (M. S. Brown and B. Douglass,2020). Cryptocurrency uses peer to peer blockchain network with each block containing information on the transactions. Each block of transaction is secured by hashes and the hash in each block is linked to the previous block. Cryptocurrency uses cryptography as the basis for the purpose of security. Owing to the decentralized way of security, any threat would have to involve all the parent blocks which is difficult to achieve. For this reason, blockchain or cryptocurrency can be more secure than traditional financial transaction. Also, there is no central server to control the transaction and all members are regarded equal [5]. Cryptocurrency is extremely volatile and is influenced by various socioeconomic factors. A crypto market cannot be accessed on the same lines as stock market. This study considers any such existing factors and their contribution towards fluctuation of crypto market. Factors that influence cryptocurrency includes availability, the supply, the demand, competition, media news and other social factors [4].
