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Examining the nature of volatility in cryptocurrencies

Cryptocurrency in its entirety value someplace on the upskirts of 202 billion US$ which provides justification to the curiosity behind researching price fluctuations and the several basic reasons behind it. The word cryptocurrency has been seen a lot of usage in this previous year owing to the latest cryptocurrency bubble which happened around spring of 2018 where the price of a cryptocurrency referred to as “bitcoin” appreciated to 20,000 USD for a single unit. To obtain a slight notion of just how widespread cryptocurrencies are becoming, the bitcoin cryptocurrency had cumulative transactions valued at $2 billion dollars each day which was a ten-fold of the prior year. 

As the planet changes and technology progresses there is always a structural change in a system which fully revamps how everyday activities will occur. Bitcoin has an amazing future but not in this shape. To grow their businesspeople Dubai have a preference to purchase Bitcoin in Dubai.  

It is critical to first comprehend what precisely a cryptocurrency is prior to delving into the underlying objective of the thesis. In laymans terms, you can perceive of cryptocurrency as e-money which basically has its existence online on computers and possesses no physical form or government backing or regulation. As there is no backing the price of these currencies are decided through market forces of supply and demand, the functions a particular currency might furnish, or any ease of payment for merchants. To put it in different words, the price of these currencies are dependent on what the market dictates its worth. 

Comprehensive insight of volatility in this market 

Cryptocurrency is a blockchain-based electronic currency which, in the future, could be leveraged as a mainstream variant of payment. However, they are related with instability and major seemingly arbitrary fluctuations in their pricing. Confidence in this variant of new currency must be produced in order to make sure that profitability is maintained. However, in order to do this, an improved comprehension of the market and the currency itself must be performed. The research can only correctly start as there is a bigger comprehension of the subject in depth. As specified earlier, there is evidence of the existence volatility within the cryptocurrency market. 

An article entitled “A possible foundation of future currency: why it has value, what is its history and its future outlook” came out which gave the now usual data with regards to cryptocurrency and bitcoin but where it stands out is that in this paper the writer introduced us to the notion of a blockchain attack and in depth comprehension of a “51% attack” however, this is a very improbable scenario as bitcoin mining protocol already has a mechanism developed into it that switches mining pools following some duration not facilitating for such control of the blockchain to occur and prevent consequences such as the double spending program. 


The relationship amongst returns in the crypto market, risk in investments and exchange rate stability have been researched extensively, and as an outcome, two empirical models are consistently leveraged when attempting to decide the level of stability in the market, but the models provide slightly differing outcomes. Throughout the research there is a lack of concentration on the factor that risk causes an increase in the likelihood of return within the crypto market. There have been several instances of the erratic nature of the price changes and the requirement of diversification of portfolio and investments. For the intentions of this research, we will be correlating price stability with risk levels. The two models that have constantly been leveraged for deciding the volatility in the financial markets are Autoregressive conditional heteroskedasticity (ARCH) and generalized autoregressive conditional heteroskedasticity (GARCH) models. The research will be concentrating on the outcomes of the GAARCH model as it furnishes typically more comprehensive and detailed outcomes. 


It is obviously observable that cryptocurrency coinage is an expanding medium of exchange with high levels of everyday traded volume, which cumulatively has been sharply increasing in the previous 4 years as a medium of exchange on top of being a medium of investment. People are purchasing and selling bitcoin all over the globe.

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