Linkages Among Cryptocurrencies: A Network Analysis Approach

Linkages Among Cryptocurrencies: A Network Analysis Approach

Shivani Inder
Copyright: © 2022 |Pages: 17
DOI: 10.4018/978-1-6684-5528-9.ch021
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Abstract

This chapter investigates the linkages and connections between different cryptocurrencies. Johansen cointegration and network analysis is employed to examine top eight cryptocurrenices (i.e., Bitcoin, Dogecoin, Stellar, Cardano, Tether, XRP, Ethereum Classic, and Chainlink). The study documents evidence to support cointegration among different cryptocurrencies. The study finds that cryptocurrencies Ethereum Classic, Chainlink, Dogecoin, and Bitcoin are connected as one group, and XRP, Stellar, and Cardano are connected as another group whereas Tether does not fall under any group and indicates no connection with other cryptocurrencies considered.
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2. Cryptocurrency

Cryptocurrency can be defined as “digital asset designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency”.

Cryptocurrencies have emerged as parallel assets as well as led to evolution of market for digital money. The origin of cryptocurrency can be traced back to Satoshi Nakamoto’s seminal white paper “Bitcoin: A Peer-to-Peer Electronic Cash System”. This nine page paper incited and revolutionzed fintech world. The paper laid down roadmap for cryptocurrencies and attempted to redefine money at the time when traditional financial systems were failing the faith of general investors in central banking system.

According to Satoshi Nakamoto, Bitcoin was introduced to provide a solution to existing problems of monetary system. According to Nakamoto (2009),

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