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Are demand shocks in Bitcoin contagious?

Author

Listed:
  • Damian Zięba

    (Faculty of Economic Sciences, University of Warsaw)

  • Katarzyna Śledziewska

    (Faculty of Economic Sciences, University of Warsaw)

Abstract

The main aim of this paper is to examine interdependencies between prices of cryptocurrencies, with the special focus on Bitcoin. The analysis is conducted in two stages and results are compared between two consequent sub-periods. In order to analyze topological properties of cryptocurrency market, the Minimum-Spanning Tree technique is used. Results indicate that Bitcoin plays one of the most important roles in the cryptocurrency market, while other cryptocurrencies form clusters and such forming has a sensible economic interpretation. In the second stage, main cryptocurrencies from each of formed clusters are analyzed using the Vector Autoregression methodology. The results from VAR (1) indicate that demand shocks in Bitcoin price are not contagious to other cryptocurrencies, while some interdependencies within the formed clusters may be observed. Overall, results indicate that conclusions drawn from the analysis of Bitcoin shall not be generalized to the entire cryptocurrency market.

Suggested Citation

  • Damian Zięba & Katarzyna Śledziewska, 2018. "Are demand shocks in Bitcoin contagious?," Working Papers 2018-17, Faculty of Economic Sciences, University of Warsaw.
    • Handle: RePEc:war:wpaper:2018-17
    as

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    File URL: https://www.wne.uw.edu.pl/index.php/download_file/4529/
    File Function: First version, 2018
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    References listed on IDEAS

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    Cited by:

    1. Zięba, Damian & Kokoszczyński, Ryszard & Śledziewska, Katarzyna, 2019. "Shock transmission in the cryptocurrency market. Is Bitcoin the most influential?," International Review of Financial Analysis, Elsevier, vol. 64(C), pages 102-125.

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    More about this item

    Keywords

    cryptocurrency market; Bitcoin; Minimum-Spanning Tree; Vector Autoregression;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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