Authors : Roland Akuoko-Sarpong; Stephen Tawiah Gyasi; Hannah Affram

Volume/Issue : Volume 9 - 2024, Issue 8 - August

Google Scholar : https://tinyurl.com/5apu3e74

Scribd : https://tinyurl.com/3fk5r4px

DOI : https://doi.org/10.38124/ijisrt/IJISRT24AUG810

Abstract : The creation of cryptocurrencies has signified many consequences for financial markets of the traditional kind and their effectiveness. This research seeks to explore the effects of cryptocurrencies on a number of the other traditional markets in aspects of price discovery, volatility, interdependence, and information transmission. Event study analysis of everyday price changes and using multivariate cointegration analysis to cryptocurrencies and the evidence is that the cryptocurrencies are inefficient as characterized by irrational behavior, bubbles, and erratically fluctuating volatilities. However, they affect a range of currency, commodity, and stock market indexes by showing return and volatility spillover effects suggesting information flowing from one market to another. Alnet, cryptocurrency markets seem inefficient on their own but over time enhance the efficiency of linked traditional markets through participation and connectivity of global financial systems. The study contributes valuable insights into the evolving nature of financial markets in the digital era through discussions on market structure, behavioral factors, and policy implications.

Keywords : Cryptocurrencies, Market Efficiency, Price Dynamics, Volatility Spillovers, Event Study, Cointegration.

References :

1. Abboushi, S. (2017). Global virtual currency–brief overview. Journal of Applied Business and Economics, 19(6), 10-18.
2. Abedin, M. Z., Hassan, M. K., & Hajek, P. (Eds.). (2021). The Essentials of Machine Learning in Finance and Accounting. Routledge.
3. Ally, M., Gardiner, M., & Lane, M. (2015). The potential impact of digital currencies on the Australian economy. In Proceedings of the Australasian Conference on Information Systems. Adelaide.
4. Almansour, B. Y., Almansour, A. Y., & In'airat, M. (2020). The impact of exchange rates on bitcoin returns: Further evidence from a time series framework. International Journal of Scientific and Technology Research, 9(2), 4577-4581.
5. Al-Yahyaee, K.H., Mensi, W., Yoon, S.-M., 2018. Efficiency, multifractality, and the long-memory property of the Bitcoin market: a comparative analysis with stock, currency, and gold markets. Finance Res. Lett. https://doi.org/10.1016/j.frl.2018.03.017.
6. Anh, D. V. (2018). The impact of cryptocurrencies on the financial and currency markets. Financial Magazine, 668, 11-13.
7. Anh, N. T. (2019). The impact of the Libra cryptocurrency on monetary policy. Banking Review. https://tapchinganhang.gov.vn/tac-dong-cua-tien-ma-hoa-libra-doi-voi-chinh-sach-tien-te.htm
8. Antonakakis, N., Chatziantoniou, I., Gabauer, D., 2019. Cryptocurrency market contagion: market uncertainty, market complexity, and dynamic portfolios. J. Int. Financ. Mark. Inst. Money 61, 37–51. https://doi.org/10.1016/j.intfin.2019.02.003.
9. Arouri, M., & Rault, C. (2012). Oil prices and stock markets in GCC countries: empirical evidence from panel analysis. International Journal of Finance and Economics, 17, 242-253.
10. Bariviera, A. F. (2017). The inefficiency of bitcoin revisited: A dynamic approach. arXiv preprint arXiv:1709.08090.
11. Barucci, E. (2003). Financial markets theory: Equilibrium, efficiency, and information. Springer.
12. Bayar, Y. (2016). Macroeconomic determinants of stock market development: evidence from Borsa. Financial Studies, 1, 69-89.
13. BBC, 2014. Mtgox Bitcoin exchange files for bankruptcy. http://www.bbc.com/news/technology-25233230
14. Bernard, A. U., & Austin, A. (2011). The role of stock market development on economic growth in Nigeria: a time-series analysis. African Research Review, 5(6), 213-230.
15. Bien, T. V., & Oanh, N. M. (2021). Virtual money and some legal issues are posed in Vietnam today. State and Law Review, 4, 30-40.
16. Blau, B. M. (2018). Price dynamics and speculative trading in Bitcoin. Research in International Business and Finance, 43, 15-21. https://doi.org/10.1016/j.ribaf.2017.05.010
17. Böhme, R., Eckey, L., Moore, T., Narula, N., Ruffing, T., & Zohar, A. (2020). Responsible vulnerability disclosure in cryptocurrencies. Communications of the ACM, 63(10), 62-71.
18. Bordo, M., & Wheelock, D. (2007). Stock market booms and monetary policy in the twentieth century. Federal Reserve Bank of St. Louis Review, 89(2), 91-122.
19. Cantillon, E., & Yin, P. L. (2011). Competition between exchanges: a research agenda. International Journal of Industrial Organization, 29(3), 329-336.
20. Cheah, E. T., & Fry, J. (2015). Speculative bubbles in Bitcoin markets? An empirical investigation into the fundamental value of Bitcoin. Economics letters, 130, 32-36.
21. Chiriță, N., Nica, I., & Popescu, M. (2022). The impact of Bitcoin in the financial market. A cybernetics approach, education. In Education, Research and Business Technologies (Vol. 276, pp. 197-209).
22. Chowdhury, E. K. (2012). Impact of inflation on bank lending rates in Bangladesh. Journal of Politics and Governance, 1(1), 5-14.
23. Chowdhury, E. K. (2012). The Impact of Merger on Shareholders' Wealth. International Journal of Applied Research in Business Administration and Economics, 1(2), 27-32.
24. Chowdhury, E. K. (2016). Investment Behavior: A Study on Working Women in Chittagong. Premier Critical Perspective, 2(1), 95-109.
25. Chowdhury, E. K. (2017). Functioning of Fama-French Three-Factor Model in Emerging Stock Markets: An Empirical Study on Chittagong Stock Exchange, Bangladesh. Journal of Financial Risk Management, 6(4), 352-363. https://doi.org/10.4236/jfrm.2017.64025
26. Chowdhury, E. K. (2017). Measuring the Effect of Macroeconomic Variables on the Stock Market Return: Evidence from Chittagong Stock Exchange. AU-International e-Journal of Interdisciplinary Research, 2(2), 1-10.
27. Chowdhury, E. K. (2018). An Assessment of Return Spillover Among Selected Stock Markets in SAARC Countries. South Asian Journal of Management, 25(1), 51-63.
28. Chowdhury, E. K. (2018). Does Foreign Direct Investment Stimulate the Economic Progress of a Developing Country? Empirical Evidence from Bangladesh. CIU Journal, 1(1), 71-86.
29. Chowdhury, E. K. (2019). An Empirical Study of Volatility in Chittagong Stock Exchange. CIU Journal, 2(1), 19-38.
30. Chowdhury, E. K. (2019). Transformation of Business Model through Blockchain Technology. The Cost and Management, 47(5), 4-9.
31. Chowdhury, E. K. (2020). Catastrophic Impact of Covid-19 on Tourism Sector in Bangladesh: An Event Study Approach. The Cost and Management, 48(4), 43-52.
32. Chowdhury, E. K. (2020). India's NRC, CAA may take Bangladesh closer to China. Asian Regional Review, Diverse Asia, 3(2).
33. Chowdhury, E. K. (2020). Is Capital Market Integration among the SAARC Countries Feasible? An Empirical Study. Eurasian Journal of Business and Economics, 13(25), 21-36. https://doi.org/10.17015/ejbe.2020.025.02
34. Chowdhury, E. K. (2020). Non-Performing Loans in Bangladesh: Bank Specific and Macroeconomic Effects. Journal of Business Administration, 41(2), 108-125.
35. Chowdhury, E. K. (2020). Volatility in Cryptocurrency Market–Before and During Covid-19 Pandemic. CIU Journal, 3(1), 69-86.
36. Chowdhury, E. K. (2021). Financial accounting in the era of blockchain-a paradigm shift from double entry to triple entry system. SSRN Electronic Journal. http://dx.doi.org/10.2139/ssrn.3827591
37. Chowdhury, E. K. (2022). Strategic approach to analyze the effect of COVID-19 on the stock market volatility and uncertainty: a first and second wave perspective. Journal of Capital Markets Studies. Advanced online publication. https://doi.org/10.1108/JCMS-05-2022-0015
38. Chowdhury, E. K. (2023). Integration of Artificial Intelligence Technology in Management Accounting Information System: An Empirical Study. In M. Z. Abedin & P. Hajek (Eds.), Novel Financial Applications of Machine Learning and Deep Learning (pp. 51-71). Springer. https://doi.org/10.1007/978-3-031-18552-6_3
39. Chowdhury, E. K., & Abedin, M. Z. (2020). COVID-19 effects on the US stock index returns An event study approach. SSRN Electronic Journal. http://dx.doi.org/10.2139/ssrn.3611683
40. Chowdhury, E. K., & Begum, R. (2012). Reward Management as Motivational Tool in Various Industries in Bangladesh: An Empirical Study. International Journal of Contemporary Business Studies, 3(11), 22-34.
41. Chowdhury, E. K., & Chowdhury, G. M. (2014). Applicability of Prediction Techniques in the Stock Market-A Chittagong Stock Exchange Perspective. International Journal of Advanced Information Science and Technology, 32(32), 126-136. DOI:10.15693/ijaist/2014.v3i12.124-134
42. Chowdhury, E. K., & Chowdhury, R. (2017). Online Shopping in Bangladesh: A Study on the Motivational Factors for Ecommerce that Influence Shopper's Affirmative Tendency towards Online Shopping. South Asian Journal of Marketing & Management Research, 7(4), 20-35. DOI:10.5958/2249-877X.2017.00019.4.
43. Chowdhury, E. K., & Chowdhury, R. (2022). Empirical research on the relationship between renewable energy consumption, foreign direct investment, and economic growth in South Asia. Journal of Energy Markets, 15(2), 1-21. https://DOI:10.21314/JEM.2022.012
44. Chowdhury, E. K., & Chowdhury, R. (2023). Role of financial inclusion in human development: Evidence from Bangladesh, India and Pakistan. Journal of the Knowledge Economy, 1-26. https://doi.org/10.1007/s13132-023-01366-x
45. Chowdhury, E. K., & Islam, A. (2017). Role of Foreign Direct Investment in the Stock Market Development of Bangladesh- A Cointegration and VAR Approach. The Bangladesh Accountant, April-June, 63-74.
46. Chowdhury, E. K., & Nahar, S. (2017). Perceptions of Accountants toward Sustainability Development Practices in Bangladesh. Journal of Management and Sustainability, 7(3), 112-119. doi:10.5539/jms.v7n3p112
47. Chowdhury, E. K., & Reza, T. (2013). Diagnostic Study on Interactive Ads and Its Response towards the FM Radio. International Journal of Research in Commerce, IT & Management, 3(2), 36-41.
48. Chowdhury, E. K., & Rozario, S. O. (2018). Impact of Attitude and Awareness of Investors on their Investment Behavior- A Study on Bangladesh Stock Market. The Bangladesh Accountant, July-September, 81-89.
49. Chowdhury, E. K., Dhar, B. K., & Stasi, A. (2022). Volatility of the US stock market and business strategy during COVID-19. Business Strategy & Development, 1-11. https://doi.org/10.1002/bsd2.203
50. Chowdhury, E. K., Dhar, B. K., Gazi, M., & Issa, A. (2022). Impact of Remittance on Economic Progress: Evidence from Low-Income Asian Frontier Countries. Journal of the Knowledge Economy, 1-26. https://doi.org/10.1007/s13132-022-00898-y
51. Chowdhury, E. K., Dhar, B. K., Thanakijsombat, T., & Stasi, A. (2022). Strategies to determine the determinants of financial performance of conventional and Islamic commercial banks: Evidence from Bangladesh. Business Strategy & Development, 1-19. https://doi.org/10.1002/bsd2.207.
52. Chowdhury, E. K., Stasi, A., & Pellegrino, A. (2023). Blockchain Technology in Financial Accounting: Emerging Regulatory Issues. Review of Economics and Finance, 21(1), 862-868. https://refpress.org/ref-vol21-a94/
53. Chowdhury, M. R. A., & Chowdhury, E. K. (2010). Estimation of Stock Market Risk-A Value at Risk Approach. The Cost & Management, 38(4), 22-27.
54. Corbet, S., Lucey, B., & Yarovaya, L. (2018). Datestamping the Bitcoin and Ethereum bubbles. Finance Research Letters, 26, 81-88.
55. Council of Economic Advisers (US) (Ed.). (2010). Economic Report of the President, Transmitted to the Congress February 2010 Together with the Annual Report of the Council of Economic Advisors. Council of Economic Advisers.
56. Edmans, A., Goldstein, I., & Jiang, W. (2012). The real effects of financial markets: The impact of prices on takeovers. The Journal of Finance, 67(3), 933-971.
57. Erdas, M. L., & Caglar, A. E. (2018). Analysis of the relationships between Bitcoin and exchange rate, commodities, and global indexes by asymmetric causality test. Eastern Journal of European Studies, 9(2), 27-45.
58. Fatas, A., & Mauro, B. W. (2019). The benefits of a global digital currency. VoxEU. https://voxeu.org/article/benefits-global-digital-currency
59. Feyen, E., Frost, J., & Natarajan, H. (2020). Digital money: Implications for emerging market and developing economies. VoxEU. https://voxeu.org/article/digital-money-implications-emerging-market-and-developing-economies
60. Gandal, N., & Hałaburda, H. (2014). Competition in the cryptocurrency market (Working Paper No. 2014-33). Bank of Canada. https://doi.org/10.34989/swp-2014-33
61. Ghazani MM, Jafari MA (2021) Cryptocurrencies, gold, and WTI crude oil market efficiency: a dynamic analysis based on the adaptive market hypothesis. Financ Innov 7(1):1–26
62. Hayes, A. (2017). Cryptocurrency value formation: An empirical study leading to a cost of production model for valuing Bitcoin. Telematics and Informatics, 34(7), 1308-1321.
63. Khalaf, H. H. (2018). The impact of electronic money on the effectiveness of monetary policy. Academy of Entrepreneurship Journal, 24(3). https://www.abacademies.org/articles/the-impact-of-electronic-money-on-the-effectiveness-of-monetary-policy-7338.html
64. Khamisa, Z. (2019). An analysis of the factors driving performance in the cryptocurrency market. Do these factors vary significantly between cryptocurrencies? [Unpublished manuscript]. Department of Land Economy, University of Cambridge. https://doi.org/10.13140/RG.2.2.31571.02089
65. Kristoufek L (2018) On Bitcoin markets (in) efficiency and its evolution. Physica A 503:257–262
66. Kuruppuarachchi D, Lin H, Premachandra IM (2019) Testing commodity futures market efficiency under time-varying risk premiums and heteroscedastic prices. Econ Model 77:92–112
67. Lansky, J. (2016). Analysis of cryptocurrency price development. Acta Informatica Pragensia, 5(2), 118-137.
68. Le Tran V, Leirvik T (2020) Efficiency in the markets of crypto-currencies. Finance Res Lett 35:101382
69. Li, D., Huang, J., & Wang, L. (2019). The impact of digital currency on the financial system: Universal decentralized digital currency, is it possible? Journal of Economics and Public Finance, 5(2), 203-218.
70. Nadarajah, S., Chu, J., 2017. On the inefficiency of Bitcoin. Econ. Lett. 150, 6–9. https://doi.org/10.1016/j.econlet.2016.10.033.
71. Naeem MA, Bouri E, Peng Z, Shahzad SJH, Vo XV (2021) Asymmetric efficiency of cryptocurrencies during COVID-19. Physica A 565:125562
72. Nan, Z., Kaizoji, T., 2019. Market efficiency of the Bitcoin exchange rate: weak and semi-strong form tests with the spot, futures, and forward foreign exchange rates. Int. Rev. Financ. Anal. 64, 273–281. https://doi.org/10.1016/j.irfa.2019.06.003.
73. Noda A (2022) Examining dynamic asset market linkages under the global COVID-19 pandemic. Econ Bull, forthcoming. https://arxiv.org/pdf/2109.02933.pdf
74. Otoo, B. A. A., & Nemati, H. (2017). Digital currency and impact on quality of life. In Proceedings of the Twenty-third Americas Conference on Information Systems. Boston.
75. Ozili, P. K. (2017). Impact of digital finance on financial inclusion and stability. Borsa Istanbul Review, 18(4), 329-340.
76. Phuoc, N. D. (2020). Virtual money can be seen as an asset. Journal of Legislative Studies, 21(421), 20-26. http://lapphap.vn/Pages/tintuc/tinchitiet.aspx?tintucid=210712 (in Vietnamese)
77. Serranía, V. J., Domínguez, J. P., Prieta, F. D., & et al. (2021). Cryptocurrencies impact on financial markets: Some insights on its regulation and economic and accounting implications. In Blockchain and Applications (Vol. 320, pp. 292-299).
78. Shah SZA, Ahmad M, Mahmood F (2018) Heuristic biases in investment decision-making and perceived market efficiency: A survey at the Pakistan stock exchange. Qual Res Financial Markets 10(1):85–110
79. Shahid MN, Jehanzeb M, Abbas A, Zubair A, Akbar MAH (2020) Predictability of precious metals and adaptive market hypothesis. Int J Emerg Mark 15(5):1011–1027.
80. Son, N. (2021). The Bitcoin fever and the future of cryptocurrencies. State Audit. http://baokiemtoannhanuoc.vn/tai-chinh---ngan-hang/con-sot-bitcoin-va-tuong-lai-cua-tien-dien-tu-146735
81. Thoa, H. T. (2017). Be aware before buying a Bitcoin mining machine. The Bank of Vietnam. https://bitly.com.vn/3e0ld8
82. Tiwari AK, Aye GC, Gupta R (2019) Stock market efficiency analysis using long spans of data: a multifractal detrended fluctuation approach. Finance Res Lett 28:398–411
83. Toan, V. D. (2021). Virtual money and its impact on Vietnam's financial market. Journal of Industry and Trade. https://tapchicongthuong.vn/bai-viet/tien-ao-va-tac-dong-cua-tien-ao-den-thi-truong-tai-chinh-viet-nam-78626.htm
84. Vayanos D, Wang J (2012) Liquidity and expected returns under asymmetric information and imperfect competition. Rev Financ Stud 25:1339–1365
85. Vidal-Tomás, D., Ibañez, A., 2018. Semi-strong efficiency of Bitcoin. Finance Res. Lett. https://doi.org/10.1016/j.frl.2018.03.013.
86. Vietnam News Agency. (2021). The price of the Ethereum cryptocurrency soared to record highs. Financial Times. http://thoibaotaichinhvietnam.vn/pages/tien-te-bao-hiem/2021-02-04/gia-tien-dien-tu-ethereum-tang-cao-ky-luc-99382.aspx
87. Vu, T. (2020). The implications of cryptocurrencies on monetary policy. Financial Magazine. https://tapchitaichinh.vn/tai-chinh-quoc-te/nhung-tac-dong-cua-tien-ky-thuat-so-doi-voi-chinh-sach-tien-te-323196.html
88. Vujicic, D., Jagodic, D., & Randic, S. (2018). Blockchain technology, bitcoin, and Ethereum: A brief overview. In Proceedings of the 17th International Symposium Infoteh-Jahorina (INFOTEH). Serbia. https://doi.org/10.1109/INFOTEH.2018.8345547
89. Wang P, Liu X, Wu S (2022) Dynamic linkage between bitcoin and traditional financial assets: a comparative analysis of different time frequencies. Entropy 24(11):1565
90. Wei, W.C., 2018. Liquidity and market efficiency in cryptocurrencies. Econ. Lett. 168, 21–24. Zargar, F.N., Kumar, D., 2019. Informational inefficiency of Bitcoin: a study based on high-frequency data. Res. Int. Bus. Finance 47, 344–353.  https://doi.org/10. 1016/j.ribaf.2018.08.008.
91. Yang YH, Shao YH, Shao HL, Stanley HE (2019) Revisiting the weak-form efficiency of the EUR/CHF exchange rate market: evidence from episodes of different Swiss franc regimes. Physica A 523:734–746
92. Yousaf I, Ali S, Bouri E, Dutta A (2021) Herding on fundamental/non-fundamental information during the COVID-19 outbreak and cyber-attacks: evidence from the cryptocurrency market. SAGE Open 11(3):21582440211029910
93. Yu JH, Kang J, Park S (2019) Information availability and return volatility in the bitcoin market: analyzing differences of user opinion and interest. Inf Process Manag 56(3):721–732
94. Zhang H, Wang P (2021) Does Bitcoin or gold react to financial stress alike? Evidence from the U.S. and China. Int Rev Econ Finance 71:629–648
95. Zhang Y, Chan S, Chu J, Sulieman H (2020) On the market efficiency and liquidity of high-frequency cryptocurrencies in a bull and bear market. J Risk Financ Manag 13(1):8
96. Zhao, Y., & Duncan, B. (2018). The impact of crypto-currency risks on the use of blockchain for cloud security and privacy. In Proceedings of the 2018 International Conference on High Performance Computing and Simulation (pp. 677-684). France. https://doi.org/10.1109/HPCS.2018.00111