Analysis of critical events in the correlation dynamics of cryptocurrency market

Chun-Xiao Nie

Physica A: Statistical Mechanics and its Applications, 2022, vol. 586, issue C

Abstract: Many emerging cryptocurrencies make it important to analyze the evolution of correlations in the cryptocurrency market. This paper uses a network method to identify critical events in the correlation dynamics of cryptocurrencies. We use the influence strength (IS) as an indicator to describe the level of change caused by critical events. The empirical analysis shows huge fluctuations in the market index near the critical event, indicating a relationship between the correlation matrix dynamics and market states. In addition, we find a synchronization between changes in correlation and changes in network structure; a positive correlation is observed. Finally, we take the networks around January 6, 2021 as an example to show local and drastic changes in the correlation structure. This paper analyzes the stability and fragility of the correlation structure in the cryptocurrency market, which helps to analyze the dynamics of this emerging market.

Keywords: MST; PMFG; Cryptocurrency; Correlation; IS-based analysis (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:586:y:2022:i:c:s0378437121007354

DOI: 10.1016/j.physa.2021.126462

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