‘Volatility’ is one constraint that critics point at while evaluating the scope of cryptocurrencies. In 2017 alone, Bitcoin price rocketed from $1000 in January to nearly $20,000 in December. However, the Bitcoin price crashed back to $5,800 in 2018. Plus, there have been swings between these plotted prices. These swings only multiplied scepticism among investors and restrained them from investing in crypto markets.
But now, a new research published in the journal Chaos: An Interdisciplinary Journal of Nonlinear Science, suggests that investment in digital asses may be more reliable than previously thought. It threw positive light on Bitcoin and argued that the cryptocurrency has matured.
A Vote of Confidence to Bitcoin
Researchers from Henryk Niewodniczanski Institute of Nuclear Physics (IFJ PAN) of the Polish Academy of Sciences in Krakow have authored the article with the title “Bitcoin market route to maturity? Evidence from return fluctuations, temporal correlations, and multi-scaling effects.” The researchers also explained how Bitcoin is following some of the same trend of the market as physical currencies.
The authors of the new research observed Bitcoin’s price between 2012 and April 2018.Analysing graphs of Bitcoin’s price, authors said:
Initially, the graphs we got were a bit crooked, which did not augur anything promising. But when we took a closer look at the data, suddenly it turned out that this crookedness originated from the first two years of the analysed period, that is, from the time when the market was just starting to shape itself. Later on, the rates of return fluctuated according to the inverse cubic law [a statistical method to study financial market maturity].
Price changes were plotted in one-minute intervals and were compared.
Lead researcher Prof. Stanislaw Drozdz says:
The most important statistical parameters of the Bitcoin market indicate very clearly that for many months now it has met all the important criteria of financial maturity. It seems that in the case of other cryptocurrencies it will be possible to expect a similar transformation. If this happens, the world’s largest market, the Forex market, can look forward to very real competition.
The paper presents:
In spite of its virtual nature and novelty, the Bitcoin market has recently and rapidly developed the statistical hallmarks which are empirically observed for all ‘mature’ markets like stocks, commodities or Forex. It appears plausible that other cryptocurrencies will follow the same trajectory.
The researchers added that maturity of cryptocurrencies was particularly evident from last six months of the examined period. Hence, findings may imply less volatility of Bitcoin in coming future.
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