The explosion in cryptocurrencies: a black hole analogy

Abstract

Using an analogy between finance and astrophysics, this study aims to investigate whether there exists a mechanism that can describe the explosive increase in the number of traded cryptocurrencies and the cryptocurrency market in general. In physics, the Schwarzschild radius indicates that black holes are constantly expanding because of their mass increase. Enriching this analogy, we consider the cryptocurrency market as a self-gravitational body whose mass is denoted by (1) the number of traded cryptocurrencies and (2) in terms of increasing market capitalization for a given number of traded cryptocurrencies. By analyzing weekly snapshot data of all traded cryptocurrencies from January 4, 2009, to June 14, 2020, we find evidence that the above-mentioned mechanism exists. The results clearly indicate the self-gravitational property of the cryptocurrency market, which is direct evidence toward the hypothesis that the changes in the traded cryptocurrencies are a positive function of the previous period’s number of traded cryptocurrencies.

Publication DOI: https://doi.org/10.1186/s40854-020-00222-0
Divisions: College of Business and Social Sciences > Aston Business School > Economics, Finance & Entrepreneurship
Additional Information: © The Author(s), 2021. This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit https://creativecommons.org/licenses/by/4.0/. This research is co-financed by Greece and the European Union (European Social Fund- ESF) through the Operational Programme «Human Resources Development, Education and Lifelong Learning» in the context of the project “Strengthening Human Resources Research Potential via Doctorate Research” (MIS-5000432), implemented by the State Scholarships Foundation (ΙΚΥ).
Uncontrolled Keywords: Bitcoin,Cryptocurrencies,Econophysics,Negative specific heat,Thermodynamic disequilibrium
Publication ISSN: 2199-4730
Last Modified: 22 Apr 2024 07:29
Date Deposited: 21 Mar 2022 17:55
PURE Output Type: Article
Published Date: 2021-01-27
Accepted Date: 2020-12-11
Authors: Ballis, Antonis (ORCID Profile 0000-0002-3033-3290)
Drakos, Konstantinos

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