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Decrypting Cryptocurrencies: An Exploration of the Impact on Financial Stability

Author

Listed:
  • Mohamed Nihal Saleem

    (The Claude Littner Business School, University of West London, London W5 5RF, UK)

  • Yianni Doumenis

    (The Claude Littner Business School, University of West London, London W5 5RF, UK)

  • Epameinondas Katsikas

    (Kent Business School, University of Kent, Canterbury CT2 7NZ, UK)

  • Javad Izadi

    (The Claude Littner Business School, University of West London, London W5 5RF, UK)

  • Dimitrios Koufopoulos

    (The Centre for Distance Education, University of London, London WC1E 7HU, UK)

Abstract

This study aims to empirically examine the relationship between cryptocurrency and various facets of the financial system. It seeks to provide a comprehensive understanding of how cryptocurrencies interact with, and influence, the stock market, the U.S. dollar’s strength, inflation rates, and traditional banking operations. This is carried out using linear regression models, Granger causality tests, case studies, including the collapse of the Futures Exchange (FTX), and the successful integration of Binance. The study unveiled a strong positive correlation between cryptocurrency market capitalization and key financial indicators like the Dow Jones Industrial Average, Consumer Price Index, and traditional banking operations. This indicates the growing significance of cryptocurrencies within the global financial landscape. However, a mild association was found with the U.S. dollar, suggesting a limited influence of cryptocurrencies on traditional fiat currencies currently. Despite certain limitations such as reliance on secondary data, methodological choices, and geographic focus, this research provides valuable insights for policymakers, financial industry stakeholders, and academic researchers, underlining the necessity for continued study into the complex interplay between cryptocurrencies and financial stability.

Suggested Citation

  • Mohamed Nihal Saleem & Yianni Doumenis & Epameinondas Katsikas & Javad Izadi & Dimitrios Koufopoulos, 2024. "Decrypting Cryptocurrencies: An Exploration of the Impact on Financial Stability," JRFM, MDPI, vol. 17(5), pages 1-21, April.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:5:p:186-:d:1386591
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    References listed on IDEAS

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    Cited by:

    1. Jairo Andrés Rendón, 2024. "The Bitcoin yield gap in Colombia: unraveling the influence of FX and Bitcoin convenience yields," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-10, December.
    2. Thurga Thevi Sitivinaigan & Cheok Mui Yee, 2025. "Sustaining Cryptocurrency Investment: Does the Moderating Effect of Critical Success Factors (CSFs) Matter? Empirical Evidence," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 9(4), pages 3485-3493, April.

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