Network Dynamics of a Financial Ecosystem
Global financial crises have led to the understanding that classical econometric models are limited in comprehending financial markets in extreme conditions, partially since they disregarded complex interactions within the system. Consequently, in recent years research efforts have been directed tow...
| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
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Scientific Reports
2021
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| Online Access: | https://hdl.handle.net/1721.1/130284 |
| _version_ | 1824458338350399488 |
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| author | Somin, Shahar Altshuler, Yaniv Gordon, Goren Pentland, Alex Shmueli, Erez |
| author2 | MIT Connection Science (Research institute) |
| author_facet | MIT Connection Science (Research institute) Somin, Shahar Altshuler, Yaniv Gordon, Goren Pentland, Alex Shmueli, Erez |
| author_sort | Somin, Shahar |
| collection | MIT |
| description | Global financial crises have led to the understanding that classical econometric models are limited in comprehending financial markets in extreme conditions, partially since they disregarded complex interactions within the system. Consequently, in recent years research efforts have been directed towards modeling the structure and dynamics of the underlying networks of financial ecosystems. However, difficulties in acquiring fine-grained empirical financial data, due to regulatory limitations, intellectual property and privacy control, still hinder the application of network analysis to financial markets. In this paper we study the trading of cryptocurrency tokens on top of the Ethereum Blockchain, which is the largest publicly available financial data source that has a granularity of individual trades and users, and which provides a rare opportunity to analyze and model financial behavior in an evolving market from its inception. This quickly developing economy is comprised of tens of thousands of different financial assets with an aggregated valuation of more than 500 Billion USD and typical daily volume of 30 Billion USD, and manifests highly volatile dynamics when viewed using classic market measures. However, by applying network theory methods we demonstrate clear structural properties and converging dynamics, indicating that this ecosystem functions as a single coherent financial market. These results suggest that a better understanding of traditional markets could become possible through the analysis of fine-grained, abundant and publicly available data of cryptomarkets. |
| first_indexed | 2024-09-23T15:12:58Z |
| format | Article |
| id | mit-1721.1/130284 |
| institution | Massachusetts Institute of Technology |
| language | English |
| last_indexed | 2025-02-19T04:24:18Z |
| publishDate | 2021 |
| publisher | Scientific Reports |
| record_format | dspace |
| spelling | mit-1721.1/1302842025-02-06T18:53:04Z Network Dynamics of a Financial Ecosystem Somin, Shahar Altshuler, Yaniv Gordon, Goren Pentland, Alex Shmueli, Erez MIT Connection Science (Research institute) Global financial crises have led to the understanding that classical econometric models are limited in comprehending financial markets in extreme conditions, partially since they disregarded complex interactions within the system. Consequently, in recent years research efforts have been directed towards modeling the structure and dynamics of the underlying networks of financial ecosystems. However, difficulties in acquiring fine-grained empirical financial data, due to regulatory limitations, intellectual property and privacy control, still hinder the application of network analysis to financial markets. In this paper we study the trading of cryptocurrency tokens on top of the Ethereum Blockchain, which is the largest publicly available financial data source that has a granularity of individual trades and users, and which provides a rare opportunity to analyze and model financial behavior in an evolving market from its inception. This quickly developing economy is comprised of tens of thousands of different financial assets with an aggregated valuation of more than 500 Billion USD and typical daily volume of 30 Billion USD, and manifests highly volatile dynamics when viewed using classic market measures. However, by applying network theory methods we demonstrate clear structural properties and converging dynamics, indicating that this ecosystem functions as a single coherent financial market. These results suggest that a better understanding of traditional markets could become possible through the analysis of fine-grained, abundant and publicly available data of cryptomarkets. 2021-03-30T16:49:06Z 2021-03-30T16:49:06Z 2020-03-12 Article https://hdl.handle.net/1721.1/130284 Somin, S., Altshuler, Y., Gordon, G., Pentland, A., & Shmueli, E. (2020). Network Dynamics of a Financial Ecosystem. Scientific Reports, 10(1), 1-10. en Attribution-NonCommercial-ShareAlike 3.0 United States http://creativecommons.org/licenses/by-nc-sa/3.0/us/ application/pdf Scientific Reports |
| spellingShingle | Somin, Shahar Altshuler, Yaniv Gordon, Goren Pentland, Alex Shmueli, Erez Network Dynamics of a Financial Ecosystem |
| title | Network Dynamics of a Financial Ecosystem |
| title_full | Network Dynamics of a Financial Ecosystem |
| title_fullStr | Network Dynamics of a Financial Ecosystem |
| title_full_unstemmed | Network Dynamics of a Financial Ecosystem |
| title_short | Network Dynamics of a Financial Ecosystem |
| title_sort | network dynamics of a financial ecosystem |
| url | https://hdl.handle.net/1721.1/130284 |
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