Analysis of Cryptocurrency Dynamics in the Emerging Market Economies: Does Reinforcement or Substitution Effect Prevail?
We analyzed cryptocurrency dynamics in the global U.S. dollar–denominated market and the emerging market economies (EMEs) with a view to ascertaining whether activities in these markets are predominantly shaped by reinforcement or substitution effect. Cryptocurrencies analyzed include the Bitcoins,...
| Main Authors: | , , , , , , |
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| Format: | Article |
| Language: | English |
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SAGE Publishing
2021-03-01
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| Series: | SAGE Open |
| Online Access: | https://doi.org/10.1177/21582440211002516 |
| _version_ | 1819160867141320704 |
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| author | Chika Anastesia Anisiuba Obiamaka P. Egbo Felix C. Alio Chuka Ifediora Ebele C. Igwemeka C. O. Odidi Hillary Chijindu Ezeaku |
| author_facet | Chika Anastesia Anisiuba Obiamaka P. Egbo Felix C. Alio Chuka Ifediora Ebele C. Igwemeka C. O. Odidi Hillary Chijindu Ezeaku |
| author_sort | Chika Anastesia Anisiuba |
| collection | DOAJ |
| description | We analyzed cryptocurrency dynamics in the global U.S. dollar–denominated market and the emerging market economies (EMEs) with a view to ascertaining whether activities in these markets are predominantly shaped by reinforcement or substitution effect. Cryptocurrencies analyzed include the Bitcoins, Ethereum, Litecoin, Steller, Bitcoin Cash, and USD Tether. The results suggest that, on average, correlation between digital assets in the cryptocurrencies’ ecosystem is positive. However, there is evidence of an outlier with respect to the USD Tether (USDT) in the global market, revealing that the USDT is negatively associated with all other cryptocurrencies. This is supported by the dynamic regression results that provided evidence of reinforcement effect in favor of the USDT in the global crypto market, thus confirming the status of the USDT as “Stablecoin” as it is pegged 1:1 to USD. In the global market context, the results also revealed that USDT/USD returns had identical outliers that could portend lesser chances of extreme gains or losses compared with suggestions of extreme gains or losses in the EMEs. Furthermore, USDT did not seem to have similar evolution in the EMEs where it had relatively marginal influence in the markets. The vector error correction (VEC) estimate showed mixed results between Altcoins in all the markets; moreover, our finding showed that reinforcement effects hold in favor of Steller (XLM) both in the Russian ruble and Indian rupee crypto markets, whereas the Chinese yuan crypto market was predominantly characterized by substitution effect in favor of Bitcoin. |
| first_indexed | 2024-12-22T17:03:16Z |
| format | Article |
| id | doaj.art-fe9d597de19142bda63530a8cab80405 |
| institution | Directory Open Access Journal |
| issn | 2158-2440 |
| language | English |
| last_indexed | 2024-12-22T17:03:16Z |
| publishDate | 2021-03-01 |
| publisher | SAGE Publishing |
| record_format | Article |
| series | SAGE Open |
| spelling | doaj.art-fe9d597de19142bda63530a8cab804052022-12-21T18:19:18ZengSAGE PublishingSAGE Open2158-24402021-03-011110.1177/21582440211002516Analysis of Cryptocurrency Dynamics in the Emerging Market Economies: Does Reinforcement or Substitution Effect Prevail?Chika Anastesia Anisiuba0Obiamaka P. Egbo1Felix C. Alio2Chuka Ifediora3Ebele C. Igwemeka4C. O. Odidi5Hillary Chijindu Ezeaku6University of Nigeria, Nsukka, NigeriaUniversity of Nigeria, Nsukka, NigeriaUniversity of Nigeria, Nsukka, NigeriaUniversity of Nigeria, Nsukka, NigeriaUniversity of Nigeria, Nsukka, NigeriaUniversity of Nigeria, Nsukka, NigeriaCaritas University, Enugu, NigeriaWe analyzed cryptocurrency dynamics in the global U.S. dollar–denominated market and the emerging market economies (EMEs) with a view to ascertaining whether activities in these markets are predominantly shaped by reinforcement or substitution effect. Cryptocurrencies analyzed include the Bitcoins, Ethereum, Litecoin, Steller, Bitcoin Cash, and USD Tether. The results suggest that, on average, correlation between digital assets in the cryptocurrencies’ ecosystem is positive. However, there is evidence of an outlier with respect to the USD Tether (USDT) in the global market, revealing that the USDT is negatively associated with all other cryptocurrencies. This is supported by the dynamic regression results that provided evidence of reinforcement effect in favor of the USDT in the global crypto market, thus confirming the status of the USDT as “Stablecoin” as it is pegged 1:1 to USD. In the global market context, the results also revealed that USDT/USD returns had identical outliers that could portend lesser chances of extreme gains or losses compared with suggestions of extreme gains or losses in the EMEs. Furthermore, USDT did not seem to have similar evolution in the EMEs where it had relatively marginal influence in the markets. The vector error correction (VEC) estimate showed mixed results between Altcoins in all the markets; moreover, our finding showed that reinforcement effects hold in favor of Steller (XLM) both in the Russian ruble and Indian rupee crypto markets, whereas the Chinese yuan crypto market was predominantly characterized by substitution effect in favor of Bitcoin.https://doi.org/10.1177/21582440211002516 |
| spellingShingle | Chika Anastesia Anisiuba Obiamaka P. Egbo Felix C. Alio Chuka Ifediora Ebele C. Igwemeka C. O. Odidi Hillary Chijindu Ezeaku Analysis of Cryptocurrency Dynamics in the Emerging Market Economies: Does Reinforcement or Substitution Effect Prevail? SAGE Open |
| title | Analysis of Cryptocurrency Dynamics in the Emerging Market Economies: Does Reinforcement or Substitution Effect Prevail? |
| title_full | Analysis of Cryptocurrency Dynamics in the Emerging Market Economies: Does Reinforcement or Substitution Effect Prevail? |
| title_fullStr | Analysis of Cryptocurrency Dynamics in the Emerging Market Economies: Does Reinforcement or Substitution Effect Prevail? |
| title_full_unstemmed | Analysis of Cryptocurrency Dynamics in the Emerging Market Economies: Does Reinforcement or Substitution Effect Prevail? |
| title_short | Analysis of Cryptocurrency Dynamics in the Emerging Market Economies: Does Reinforcement or Substitution Effect Prevail? |
| title_sort | analysis of cryptocurrency dynamics in the emerging market economies does reinforcement or substitution effect prevail |
| url | https://doi.org/10.1177/21582440211002516 |
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