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Seeking a Chaotic Order in the Cryptocurrency Market

1
Department of Finance, College of Business Administration, American University of the Middle East, Eqaila, Kuwait
2
Department of Mathematics, College of Engineering and Technology, American University of the Middle East, Eqaila, Kuwait
*
Author to whom correspondence should be addressed.
Math. Comput. Appl. 2019, 24(2), 36; https://doi.org/10.3390/mca24020036
Received: 24 February 2019 / Revised: 26 March 2019 / Accepted: 26 March 2019 / Published: 4 April 2019
(This article belongs to the Section Social Sciences)
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Abstract

In this study, we investigate the existence of chaos in the global cryptocurrency market. Specifically, we analyze parameters of chaotic order, nonlinearity, sensitivity to the initial conditions, monofractality, and multifractality. For this purpose, we conduct a comprehensive series of tests, including Brock–Dechert–Scheinkman (BDS) test, largest Lyapunov exponent, box-counting, and monogram analysis for fractal dimension, and multiple tests for long-range dependence (Aggregated Variances, Peng, Higuchi, R/S Analysis, and Multifractal Detrended Fluctuation Analysis (MFDFA)). All tests are performed over a variety of major cryptocurrencies: Bitcoin, Litecoin, Ethereum, and Ripple. The empirical results support the existence of chaos in the cryptocurrency market. Accordingly, cryptocurrency returns are not random and follow a chaotic order. Therefore, long term predictions are not possible, contrary to most of the discussions ongoing in the media and the public. View Full-Text
Keywords: chaos; bitcoin; cryptocurrency; BDS; largest Lyapunov exponent; Hurst exponent; fractal dimension; MFDFA chaos; bitcoin; cryptocurrency; BDS; largest Lyapunov exponent; Hurst exponent; fractal dimension; MFDFA
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Gunay, S.; Kaşkaloğlu, K. Seeking a Chaotic Order in the Cryptocurrency Market. Math. Comput. Appl. 2019, 24, 36.

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