A study published in Chaos: An Interdisciplinary Journal of Nonlinear Science suggests that the volatility seen in cryptocurrency markets is similar to what is expected in gold, oil and currencies.
Stanislaw Drozdz, the study’s main author and professor at the Institute of Nuclear Physics of the Polish Academy of Sciences, says the results of the study could mean that Forex and other traditional markets could be in for serious competition from cryptocurrencies.
The team behind the study looked at cryptocurrency prices over one-minute increments from 2012 through April 2018. They found that while the first two years were impacted by “system-specific irregularities,” the volatility in cryptocurrency markets matched what was expected of mature markets.
“While early trading was affected by system-specific irregularities, it is found that over the months preceding April 2018 all these statistical indicators approach the features hallmarking maturity,” the report states. “This can be taken as an indication that the Bitcoin market, and possibly other cryptocurrencies, carry concrete potential of imminently becoming a regular market alternative to the foreign exchange.”
According to Drozdz, Bitcoin has met every parameter used for determining financial maturity. If Bitcoin can manage to make the breakthrough, he is confident that other cryptocurrencies will have a bright future. He says it’s possible for other cryptocurrencies to expect a similar transformation to what Bitcoin experienced.
“In the case of Bitcoin, we detected multifractality in the functions of fluctuations in rates of return, particularly evident in the last six months of the examined period,” the report states. “This was of the same type as for regular, mature markets, such as the stock, dollar, oil or bond markets.”
The cryptocurrency market has been treading water in 2018, but the market has remained stable at large.
But there are still critics of the crypto market. In a report released in September 2018, UK Chair of the Treasury Committee, Nicky Morgan, called on the UK Financial Conduct Authority to establish a regulatory framework for the cryptocurrency industry. Morgan cited concerns related to money laundering and lack of regulation.
Still, a new report from IBM suggests that central banks would back central bank digital currencies (CBDCs) if distributed ledger technology is improved. The study examined opinions from 21 central banks between July and September. The results showed that 38% of the central banks were already testing CBDCs for inter-bank transactions. While most of these banks have not invested in virtual currencies, most would be open to testing CBDCs.