Will cryptocurrencies help alleviate recessions?

• Autor(a) principal: Baptista, Nuno Miguel da Costa Justo
• Data de Publicação: 2020
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10071/21472
• topic: Bitcoin; Ethereum; Eosio; Litecoin; Ripple; Crypto-currencies; Financial market; Economic recessions and expansions; Panel data; Logit model; Criptomoedas; Mercado financeiro; Recessões e expansões económicas; Dados em painel; Modelo Logit

The objective of this dissertation is to assess and explain the effects of cryptocurrencies on the business cycle and to understand whether this new method of transaction of goods and other values, may or may not ease the cycle of future economic recessions, facilitating the recovery of the economy to its equilibrium state and re-enabling its expansion. To achieve this goal we used the returns for some selected cryptocurrencies and other variables referring to their normal activity as ratios between volume of transactions and total amount in the market. In addition and to improve the model, we added variables that represent alternatives to cryptocurrencies, from an investing point of view. Official currencies such as the Eurozone Euro, the United States Dollar, the United Kingdom Pound, the Japanese Yen, and the Chinese Yuan, and others market-related variables such as the returns of the S&P500, Gold and Silver, the reference interest rates of central banks of various countries and the stock market value of each country. Using Logit models for panel data, with a particular emphasis on Fixed Effects Logit models, we can analyze how the variables vary over time for each country and how they affect our general model, which is composed of a binary dependent variable (dummy) that allows us to analyze both situations of interest: expansion versus recession. We built this work around five cryptocurrencies, Bitcoin, Litecoin, Eosio, Ripple and Ethereum, with data from 38 countries, all from 2007 to 2019. We concluded that some cryptocurrencies can have an impact on future economic recessions, such as Ripple, which provides cheap and fast transactions, Ethereum, which can provide an infinite supply of its coins to help drive an expansion and Bitcoin, which can be used as a safe haven to protect and diverse risk on investors portfolio.