Network Dynamics of a Financial Ecosystem
© 2020, The Author(s). 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...
| Main Authors: | , , , , |
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| Other Authors: | |
| Format: | Article |
| Language: | English |
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Springer Science and Business Media LLC
2021
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| Online Access: | https://hdl.handle.net/1721.1/135191 |
| _version_ | 1811097892876713984 |
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| author | Somin, Shahar Altshuler, Yaniv Gordon, Goren Pentland, Alex ’Sandy’ Shmueli, Erez |
| author2 | Massachusetts Institute of Technology. Media Laboratory |
| author_facet | Massachusetts Institute of Technology. Media Laboratory Somin, Shahar Altshuler, Yaniv Gordon, Goren Pentland, Alex ’Sandy’ Shmueli, Erez |
| author_sort | Somin, Shahar |
| collection | MIT |
| description | © 2020, The Author(s). 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 | 2024-09-23T17:06:38Z |
| format | Article |
| id | mit-1721.1/135191 |
| institution | Massachusetts Institute of Technology |
| language | English |
| last_indexed | 2024-09-23T17:06:38Z |
| publishDate | 2021 |
| publisher | Springer Science and Business Media LLC |
| record_format | dspace |
| spelling | mit-1721.1/1351912023-01-10T19:59:11Z Network Dynamics of a Financial Ecosystem Somin, Shahar Altshuler, Yaniv Gordon, Goren Pentland, Alex ’Sandy’ Shmueli, Erez Massachusetts Institute of Technology. Media Laboratory © 2020, The Author(s). 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. 2021-10-27T20:22:23Z 2021-10-27T20:22:23Z 2020 2021-06-25T18:29:07Z Article http://purl.org/eprint/type/JournalArticle https://hdl.handle.net/1721.1/135191 en 10.1038/S41598-020-61346-Y Scientific Reports Creative Commons Attribution 4.0 International license https://creativecommons.org/licenses/by/4.0/ application/pdf Springer Science and Business Media LLC Scientific Reports |
| spellingShingle | Somin, Shahar Altshuler, Yaniv Gordon, Goren Pentland, Alex ’Sandy’ 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/1721.1/135191 |
| work_keys_str_mv | AT sominshahar networkdynamicsofafinancialecosystem AT altshuleryaniv networkdynamicsofafinancialecosystem AT gordongoren networkdynamicsofafinancialecosystem AT pentlandalexsandy networkdynamicsofafinancialecosystem AT shmuelierez networkdynamicsofafinancialecosystem |