Abstract
Social systems are characterized by an enormous network of connections and factors that can influence the structure and dynamics of these systems. Among them the whole economical sphere of human activity seems to be the most interrelated and complex. All financial markets, including the youngest one, the cryptocurrency market, belong to this sphere. The complexity of the cryptocurrency market can be studied from different perspectives. First, the dynamics of the cryptocurrency exchange rates to other cryptocurrencies and fiat currencies can be studied and quantified by means of multifractal formalism. Second, coupling and decoupling of the cryptocurrencies and the conventional assets can be investigated with the advanced cross-correlation analyses based on fractal analysis. Third, an internal structure of the cryptocurrency market can also be a subject of analysis that exploits, for example, a network representation of the market. In this work, we approach the subject from all three perspectives based on data from a recent time interval between January 2019 and June 2020. This period includes the peculiar time of the Covid-19 pandemic; therefore, we pay particular attention to this event and investigate how strong its impact on the structure and dynamics of the market was. Besides, the studied data covers a few other significant events like double bull and bear phases in 2019. We show that, throughout the considered interval, the exchange rate returns were multifractal with intermittent signatures of bifractality that can be associated with the most volatile periods of the market dynamics like a bull market onset in April 2019 and the Covid-19 outburst in March 2020. The topology of a minimal spanning tree representation of the market also used to alter during these events from a distributed type without any dominant node to a highly centralized type with a dominating hub of USDT. However, the MST topology during the pandemic differs in some details from other volatile periods.
Highlights
Whether complexity of a system is viewed in the purely intuitive sense of a nontrivial order that emerges spontaneously from an overall disorder or it is grasped more formally using one of several dozen mathematical, physical, and information-theoretic measures, we are surrounded by its signaturesEntropy 2020, 22, 1043; doi:10.3390/e22091043 www.mdpi.com/journal/entropyEntropy 2020, 22, 1043 and face its manifestations almost everywhere
For this study we collected high-frequency recordings of X/BTC and BTC/USDT exchange rates, where X is one of 128 cryptocurrencies traded on Binance platform [21] and USDT is related to USD by a 1:1 peg [52]
We collected 1-min quotes of several conventional assets expressed in US dollar—13 currencies: AUD, EUR, GBP, NZD, Canadian dollar (CAD), CHF, CNH, Japanese yen (JPY), MXN, NOK, PLN, TRY, ZAR, three stock market indices: Dow Jones Industrial Average (DJI), Nasdaq100, S&P500, and four commodities: XAU
Summary
Whether complexity of a system is viewed in the purely intuitive sense of a nontrivial order that emerges spontaneously from an overall disorder or it is grasped more formally using one of several dozen mathematical, physical, and information-theoretic measures, we are surrounded by its signatures. Social phenomena like the emergence of communication and cooperation, build-up of hierarchies and organizations, opinion formation, the emergence of political systems, and the structure and dynamics of financial markets are all among the iconic examples of the real-world complexity [1,2,3] Specialists from such disciplines like mathematics, physics, information theory, and data science working together with econometrists, sociologists, quantitative linguists, and psychologists for more than a quarter century have already been dealing with such phenomena trying to describe them in a language of exact science, and to model and explain them using methods and tools that had earlier been applied successfully to natural systems. At present the market is more consolidated and shows signatures of maturity [11]
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