Negative bubbles and shocks in cryptocurrency markets

John Fry and Jeremy Eng Tuck Cheah

International Review of Financial Analysis, 2016, vol. 47, issue C, 343-352

Abstract: In this paper we draw upon the close relationship between statistical physics and mathematical finance to develop a suite of models for financial bubbles and crashes. The derived models allow for a probabilistic and statistical formulation of econophysics models closely linked to mainstream financial models. Applications include monitoring the stability of financial systems and the subsequent policy implications. We emphasise the timeliness of our contribution with an application to the two largest cryptocurrency markets: Bitcoin and Ripple. Results shed new light on emerging debates over the nature of cryptocurrency markets and competition between rival digital currencies.

Keywords: Bitcoin; Ripple; Cryptocurrencies; Bubbles; Negative bubbles; Econophysics (search for similar items in EconPapers)
JEL-codes: C1 E4 G1 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (219)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:47:y:2016:i:c:p:343-352

DOI: 10.1016/j.irfa.2016.02.008

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