Towards an understanding of cryptocurrency: A comparative analysis of cryptocurrency, foreign exchange, and stock

Jiaqi Liang, Linjing Li, Weiyun Chen, Daniel Zeng

Research output: Chapter in Book/Report/Conference proceedingConference contribution

1 Scopus citations

Abstract

Cryptocurrency is a cutting-edge Fintech innovation and currently a worldwide hotspot. However, the high-speed evolution of it has already caused a series of public security related events all around the world. Cryptocurrency was built initially as a possible implementation of digital currency, then various derivatives were created in a variety of fields such as financial transactions, capital management, and even nonmonetary applications. This paper aims to offer analytical insights to help understand cryptocurrency by treating it as a financial asset. We position cryptocurrency by comparing its dynamic characteristics with two traditional and massively adopted financial assets: foreign exchange and stock. Based on the daily close prices about four years, we first construct the correlation matrices and asset trees of all three markets, then conduct comparisons on five properties: volatility, centrality, clustering structure, robustness, and risk. Our investigation suggests that the dynamics of cryptocurrency are more similar to stock. As to the robustness and clustering structure, our analysis shows cryptocurrency market is more fragile than stock market, thus it is currently a high-risk financial market. Our work is the first to study cryptocurrency with the help of well-understood financial assets and may shed some light on investment decisions, regulation, and legislation.

Original languageEnglish (US)
Title of host publication2019 IEEE International Conference on Intelligence and Security Informatics, ISI 2019
EditorsXiaolong Zheng, Ahmed Abbasi, Michael Chau, Alan Wang, Lina Zhou
PublisherInstitute of Electrical and Electronics Engineers Inc.
Pages137-139
Number of pages3
ISBN (Electronic)9781728125046
DOIs
StatePublished - Jul 2019
Externally publishedYes
Event17th IEEE International Conference on Intelligence and Security Informatics, ISI 2019 - Shenzhen, China
Duration: Jul 1 2019Jul 3 2019

Publication series

Name2019 IEEE International Conference on Intelligence and Security Informatics, ISI 2019

Conference

Conference17th IEEE International Conference on Intelligence and Security Informatics, ISI 2019
CountryChina
CityShenzhen
Period7/1/197/3/19

Keywords

  • Asset tree
  • Blockchain
  • Correlation matrix
  • Cryptocurrency
  • Financial market
  • Systemic risk

ASJC Scopus subject areas

  • Safety, Risk, Reliability and Quality
  • Computer Vision and Pattern Recognition
  • Information Systems and Management
  • Information Systems

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  • Cite this

    Liang, J., Li, L., Chen, W., & Zeng, D. (2019). Towards an understanding of cryptocurrency: A comparative analysis of cryptocurrency, foreign exchange, and stock. In X. Zheng, A. Abbasi, M. Chau, A. Wang, & L. Zhou (Eds.), 2019 IEEE International Conference on Intelligence and Security Informatics, ISI 2019 (pp. 137-139). [8823373] (2019 IEEE International Conference on Intelligence and Security Informatics, ISI 2019). Institute of Electrical and Electronics Engineers Inc.. https://doi.org/10.1109/ISI.2019.8823373