The explosion in cryptocurrencies: a black hole analogy

Antonis Ballis and Konstantinos Drakos

Financial Innovation, 2021, vol. 7, issue 1, 1-8

Abstract: 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.

Keywords: Bitcoin; Cryptocurrencies; Econophysics; Negative specific heat; Thermodynamic disequilibrium (search for similar items in EconPapers)
JEL-codes: G14 G15 G23 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1186/s40854-020-00222-0 Abstract (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:fininn:v:7:y:2021:i:1:d:10.1186_s40854-020-00222-0

Ordering information: This journal article can be ordered from
http://www.springer. ... nomics/journal/40589

DOI: 10.1186/s40854-020-00222-0

Access Statistics for this article

Financial Innovation is currently edited by J. Leon Zhao and Zongyi

More articles in Financial Innovation from Springer, Southwestern University of Finance and Economics
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().