Chaos in the bitcoin market

The value of Bitcoin has soared. At the start of 2017, a Bitcoin was valued at $509.53, but by the end of the year it hit an all-time . Since then, the value has fallen significantly again, demonstrating how volatile the cryptocurrency can be. Although Bitcoin has been around for nine years, few studies have looked into how the market works. high price of $19,205.61

“As an economist specializing in financial markets, the properties of the Bitcoin market appeared to be unexplored till now,” says , from the  in Florence, Italy, who co-authored the new paper. Bekiros and his colleagues studied the features of chaos, randomness, and multi-fractality, three important concepts for understanding how a market works. “By examining these three issues, we can shed light on the complexity structure underlying the Bitcoin market,” explains Bekiros. Stelios BekirosEuropean University Institute

The team wanted to investigate whether Bitcoin may act as an effective safe haven for investors, traders, and speculators. They selected two periods of time during which they examined the market: one period when prices slowly increased, and one high and turbulent time period during which they exponentially increased.

The team found that the higher the price of Bitcoin the higher the uncertainty as to whether or not an investment would get a return. They also found that the market behaves in a chaotic way. “Overall, we concluded that the high-price level regime period has strongly revealed nonlinear dynamical patterns in the bitcoin market,” says Bekiros.

Better understanding of price fluctuations could one day help to regulate the trade of cryptocurrency. “Financial stability is also an issue of paramount importance nowadays throughout global markets, especially in the aftermath of the global financial crisis,” points out Bekiros. “Our results may prove to be crucial in promoting stability and better regulation.”

Lahmiri, S. & Bekiros, S.: “,”  (2018) Chaos, randomness and multi-fractility in Bitcoin marketChaos, Solitons and Fractals

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