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Cryptoassets
To analyse the Cryptoassets, it is necessary the study on the technology
behind them: Distributed Ledger Technology (DLT). These networks
can be thought as a large spreadsheet, openly shared on the Internet,
where only things can be added, and where the information is
controlled by the users of the system themselves. The previous blog
post, “Blockchain: ¿cómo puede contribuir esta tecnología al sistema
nanciero?”, provides a detailed view on the meaning of this type of
network and its use in the nancial system. This post will refer only to
its application on cryptoassets.
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20/4/2018 Cryptoassets: source of systemic financial risk? – Emiliano Giupponi – Medium
Relevance
In order to analyze the quantitative relevance of Cryptoassets, I present
and compare its capitalization levels against other assets from the
international nancial market. The three major ones per capitalization
level to be analysed are bitcoin, ether and ripple. The period of study
begins in 2017 and continues to the present[5].
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20/4/2018 Cryptoassets: source of systemic financial risk? – Emiliano Giupponi – Medium
Table 1. Selected maximum cryptoactive prices. U$S. Source: Own elaboration based on CoinMetrics
data
Figure 1. Cryptoactive and other nancial system assets capitalization. US$ in Billion. Source: own
elaboration based on CoinmarketCap, IMF, The World Factbook and World Exchanges data.
M1=banknotes and coins+deposits
In term of daily trading, in the rst three months of 2018, the trade of
all cryptoassets is less than 1% of the volumes of the S&P 500.
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20/4/2018 Cryptoassets: source of systemic financial risk? – Emiliano Giupponi – Medium
However, over the same period, bitcoin trading are 7 times higher than
that of SPDR Gold Shares (Figure 2).
Figure 2. Daily trading volume (average 1st quarter 2018). US$, in billions. Source: Own elaboration
based on CoinMetrics
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20/4/2018 Cryptoassets: source of systemic financial risk? – Emiliano Giupponi – Medium
Figure 4. Leveraged funds and retail agents net positions on bitcoin futures. In quantities. Source:
Own elaboration based on CoinMetrics data.
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20/4/2018 Cryptoassets: source of systemic financial risk? – Emiliano Giupponi – Medium
Figure 5. Cryptoassets and traditional assets correlation. High and positive correlation in green. High
and negative correlation in red. Mean correlation in yellow. Low blank correlation. Source: Own
formulation based on CoinMetrics data
Concluding remarks
The main preliminary nding is, rst, the current size of the
cryptoactive system is small in relation to the traditional nancial
system, although it is rapidly increasing. Second, there does not seem
to be a signi cant association between traditional and cryptoactive
asset market behaviour.
Footnotes:
Footnotes:
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20/4/2018 Cryptoassets: source of systemic financial risk? – Emiliano Giupponi – Medium
[3] For instance, see the classi cation of the German Federal Financial
Supervisory Authority and the Swiss Financial Market Supervisory
Authority (FINMA). Also, see the book by Chris Burniske and Jack
Tatar (2017) Cryptoassets: The Innovative Investor’s Guide to Bitcoin and
Beyond, MCGrawHill.
[9] It is interesting to note that the sign of the correlation between the
dollar and cryptoactives is the same as that of the correlation between
the dollar and the rest of the traditional assets, although with a lower
value.
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20/4/2018 Cryptoassets: source of systemic financial risk? – Emiliano Giupponi – Medium
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20/4/2018 Cryptoassets: source of systemic financial risk? – Emiliano Giupponi – Medium
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