PROBLEMS AND PERSPECTIVES OF DEVELOPMENT OF CRYPTOCURRENCY MARKER IN KAZAKHSTAN
PROBLEMS AND PERSPECTIVES OF DEVELOPMENT OF CRYPTOCURRENCY MARKER IN KAZAKHSTAN
Daulet Turgunov
Student, M.Narikbayev Kazguu University,
Kazakhstan, Nur-Sultan
Roman Dovolnov
MA(Social Science) Economics, M.Narikbayev Kazguu University,
Kazakhstan, Nur-Sultan
ABSTRACT
The purpose of this study is to study the individual properties of the cryptocurrency market. Guided by the concept of implied volatility, the authors studied the asymmetry property of the market reaction to news. Based on the concept of realized volatility, the hypothesis of volatility effect by economical and restriction news, through semantic analysis was provided on period of 2 years through Google* news keywords analysis (*по требованию Роскомнадзора информируем, что иностранное лицо, владеющее информационными ресурсами Google, является нарушителем законодательства Российской Федерации – прим.ред).
It was defined through regression analysis that low capitalized cryptocurrencies are not affected by economical news, as high capitalized cryptocurrencies. Both types of cryptocurrencies are mainly affected by restrictive legislations and rising gold prices.
Keywords: cryptocurrency, regression analysis, gold price, economical news, volatility.
Cryptocurrency is a decentralized convertible currency based on mathematical principles, which is protected by cryptographic methods, i.e. uses cryptography to create a distributed, decentralized, and secure information economy. To meet the challenges of the digital revolution, it is necessary to determine what factors influence the development of the cryptocurrency market as a potential new world currency [1] . It is important that cryptocurrencies, as private money, are essentially a means for cross-border payments, where, competing with each other, a new global virtual currency will eventually stand out among them, which can become the main means of payment in international payments [2].
Purpose: The objectives of the study are utilized to gain a clear understanding of the goal of this study is to determine the most important factors that can be influenced by the level of CSR among publicly traded companies in Kazakhstan. An additional goal of the research is to compare the findings of two models: Kazakhstan and Russian companies.
The research question is to identify what are the problems and perspectives of the development of the cryptocurrency market and what factors affect their change. Taking all the things together, we can build and investigate two hypotheses regarding the highly capitalized and low capitalized cryptocurrencies:
Model I:
H0: 3 factors have no significant influence on the development of the market of highly market capitalized cryptocurrency.
H1: 3 factors have a significant influence on the development of the market of highly market capitalized cryptocurrency.
Model II:
H0: 3 factors have no significant influence on the development of the market of low market capitalized cryptocurrency.
H1: 3 factors have a significant influence on the development of the market of low market capitalized cryptocurrency.
Object: Intraday (high-frequency) data for Bitcoin prices covering the period from 1st December 2020 to 1st January 2021 was used to construct weekly measures of realized volatility, and its various covariates. The starting day of the sample period and the 60-minutes frequency of the data because results were also presented, for comparison purposes, for other major cryptocurrencies in addition to Bitcoin (see Section 1.2.) It should also be noted that a 60-minutes frequency renders it possible to circumvent liquidity issues (or the lack thereof), extreme high-frequency noise from no-activity periods observed mainly in very small-time windows, and zero prices. In this study it was defined that a trading day from Monday 16 to Sunday from 00:00 EST to 23:59 EST, which renders it possible to have a higher number of observations compared to an 8-hourly and 12-hourly bases [3]. Intraday (high-frequency) data for EOS, Ethereum (ETH), Litecoin (LTC) and Ripple (XRP) prices covering the same period for the robustness analysis was used. Data for Bitcoin and other cryptocurrencies are from CryptoCompare.com (https://www.cryptoCompare.com), which provides data on a number of liquid Bitcoin markets and other major cryptocurrencies.
Independent variables in regression model are:
X1 - the impact of the gold price.
X2 - the impact of the economical and political shocks.
X3 - the impact of the prohibition on the usage of cryptocurrencies in other countries.
Table 1.
Results for high capitalized cryptocurrencies
The regression model is represented as:
Y = 342,5 + GP*103,66-99,64*EPS+1,245*RR
P-values for all 3 factors has shown its significance (<0,05) which reflects the acceptance of stated Hypothesis:
H1: 3 stated market drivers has an effect on high capitalized cryptocurrencies (Bitcoin, BTC)
Table 2.
Results for low capitalized cryptocurrencies
The regression model is represented as:
Y = 0,0044 - GP*1943 +0,0075*RR
P-values for factors GP and RR factors has shown its significance (<0,05) which reflects the acceptance of stated Hypothesis:
H1: 2 stated market drivers has an effect on low capitalized cryptocurrencies (Litecoin LTC, Ripple XRP)
The current study can give additional information for studying how cryptocurrency volatility is affected by external factors. The results can prove that price volatility can be significantly improved by larger amount of negative economical news, as well as economical and political. For stable cryptocurrency as BTC with large market capitalization it can be seen that EPS did affected on price volatility positively, which is in line with conclusion of Cio et al (2015) that countries should have decline EPS in order to improve price volatility of cryptocurrency. It can be applicable to Kazakhstan in the way that lower the EPS, then lower the volatility of cryptocurrencies. Then investors might use BTC as a hedging instrument as a more efficient instrumentFor young and low capitalized cryptocurrencies, EPS did not showed statistical significance, however factor of RR increases price volatility on these currencies. More restrictions are imposed on these types of currencies, then more fluctuations on the market occurs. Interestingly, that increasing Gold Price affected negatively on volatility, as these are substitute asset and can cause additional volatility.
BTC, LTC, XRPP are the main currencies and it is necessary for Kazakhstan crypto miners to understand which drivers affect on additional volatility. As we can see, EPS and RR imposed additional volatility for the last 2 years, which government could control. As a topic of future studies, additional governmental organization can develop cryptocurrency mining market with the usage of the above model.
Reference:
- Akhtaruzzaman, Md., A. Sensoy, and S. Corbet. 2019. “The Influence of Bitcoin on Portfolio Diversification and Design.” Finance Research Letters. doi:10.1016/j.frl.2019.101344. [Crossref].
- Basher, S. A., and P. Sadorsky. 2006. “Day-of-the-week Effects in Emerging Stock Markets.” Applied Economics Letters 13 (10): 621–628. [Taylor & Francis Online].
- Wood, S. 2019. “gam.models.” RDocumentation. https://www.rdocumentation.org/packages/mgcv/versions/1.8-31/topics/gam.models (Retrieved 17 February 2020).