Research published by a group of European scientists has concluded that Bitcoin markets are experiencing a phase of accelerated maturity, which will allow them soon to become viable alternatives to any traditional financial market.
The Study was published in the July 2018 issue of Chaos: An Interdisciplinary Journal of Nonlinear Science. This is a scientific journal administered by the American Institute of Physics (AIP).
A team of researchers from the Polish Academy of Sciences in Krakow authored a report titled “Bitcoin market route to maturity? Evidence from return fluctuations, temporal correlations, and multiscaling effects,” and show aRes reasonably optimistic view of the future of cryptocurrencies.
The report explains that although Bitcoin experienced a substantial period of accelerated growth, the market followed some of the same trends as other traditional markets, including those of other fiat currencies.
According to studies, price fluctuations followed the parameters of Inverse Cubic Law, a law that establishes the relationship between price fluctuations, trading activity, and other factors to determine the stability of a market:
“Initially, the graphs we got were a bit crooked, which did not augur anything promising …
However, when we took a closer look at the data, suddenly it turned out that this crookedness originated from the first two years of the analyzed period, that is, from the time when the market was just starting to shape itself …
Later on, the rates of return fluctuated according to the inverse cubic law.”
The researchers explain that bitcoin is showing evidence of behavior similar to that of other traditional markets of greater maturity and confidence. They mention that for example, the performance of prices according to the expectations thrown through the formulas is similar in stability to the market of stocks, forex, oil or even bonds:
“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. This was of the same type as for regular, mature markets, such as the stock, dollar, oil or bond markets.”
The problem of market volatility has been one of the main arguments used by skeptics to sustain that cryptocurrencies cannot be valid substitutes for fiat money, but the study culminates with a statement that can counteract these opinions from the most objective point of view possible:
“The most important statistical parameters of the Bitcoin market indicate very clearly that for many months now it has met all the important criteria of financial maturity. It seems that in the case of other cryptocurrencies it will be possible to expect a similar transformation. If this happens, the world’s largest market, the Forex market, can look forward to very real competition.”
Full paper available here