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The Impact of Cryptocurrency Adoption on Stock Market Capitalization: A Cross-Country Analysis

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  • Menda, Emir

Abstract

This study investigates the relationship between cryptocurrency adoption and stock market capitalization across countries, while controlling for GDP per capita. Using cross-sectional data from 154 countries, we employ ordinary least squares regression to analyze this relationship. The findings reveal a statistically significant positive association between cryptocurrency adoption and stock market capitalization. Specifically, that a one-unit increase in the cryptocurrency adoption score is associated with a 182.614 percentage point increase in stock market capitalization as a percentage of GDP. In addition, GDP per capita shows a significant positive relationship with stock market capitalization, confirming the connection between economic development and financial market depth. These results suggest that cryptocurrency adoption complements traditional financial markets rather than substituting, offering important insights for policymakers, investors, and researchers in understanding the evolving financial landscape. This study contributes to the growing literature on cryptocurrency markets by providing a broader, cross-country perspective on how digital currency growth affects traditional financial markets. Our findings have implications for financial market development, economic policy, and investment strategies in an increasingly digitalized global economy.

Suggested Citation

  • Menda, Emir, 2024. "The Impact of Cryptocurrency Adoption on Stock Market Capitalization: A Cross-Country Analysis," MPRA Paper 121792, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:121792
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    References listed on IDEAS

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    1. Corbet, Shaen & Lucey, Brian & Urquhart, Andrew & Yarovaya, Larisa, 2019. "Cryptocurrencies as a financial asset: A systematic analysis," International Review of Financial Analysis, Elsevier, vol. 62(C), pages 182-199.
    2. Gil-Alana, Luis Alberiko & Abakah, Emmanuel Joel Aikins & Rojo, María Fátima Romero, 2020. "Cryptocurrencies and stock market indices. Are they related?," Research in International Business and Finance, Elsevier, vol. 51(C).
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    More about this item

    Keywords

    Cryptocurrency adoption; Stock market capitalization; Cross-country analysis; Financial markets; Economic development;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General

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