TY - GEN
T1 - Towards an understanding of cryptocurrency
T2 - 17th IEEE International Conference on Intelligence and Security Informatics, ISI 2019
AU - Liang, Jiaqi
AU - Li, Linjing
AU - Chen, Weiyun
AU - Zeng, Daniel
N1 - Funding Information:
V. ACKNOWLEDGEMENT This work was supported in part by the National Key Research and Development Program of China under Grant 2016QY02D0305 and 2017YFC0820105, the National Natural Science Foundation of China under Grants 71621002 and 71702181, as well as the Key Research Program of the Chinese Academy of Sciences under Grant ZDRW-XH-2017-3. Linjing Li is the corresponding author.
Publisher Copyright:
© 2019 IEEE.
PY - 2019/7
Y1 - 2019/7
N2 - 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.
AB - 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.
KW - Asset tree
KW - Blockchain
KW - Correlation matrix
KW - Cryptocurrency
KW - Financial market
KW - Systemic risk
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U2 - 10.1109/ISI.2019.8823373
DO - 10.1109/ISI.2019.8823373
M3 - Conference contribution
AN - SCOPUS:85072969911
T3 - 2019 IEEE International Conference on Intelligence and Security Informatics, ISI 2019
SP - 137
EP - 139
BT - 2019 IEEE International Conference on Intelligence and Security Informatics, ISI 2019
A2 - Zheng, Xiaolong
A2 - Abbasi, Ahmed
A2 - Chau, Michael
A2 - Wang, Alan
A2 - Zhou, Lina
PB - Institute of Electrical and Electronics Engineers Inc.
Y2 - 1 July 2019 through 3 July 2019
ER -