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Complex Systems Theory and Crashes of Cryptocurrency Market

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Information and Communication Technologies in Education, Research, and Industrial Applications (ICTERI 2018)

Part of the book series: Communications in Computer and Information Science ((CCIS,volume 1007))

Abstract

This article demonstrates the possibility of constructing indicators of critical and crash phenomena in the volatile market of cryptocurrency. For this purpose, the methods of the theory of complex systems have been used. The possibility of constructing dynamic measures of complexity as recurrent, entropy, network, quantum behaving in a proper way during actual pre-crash periods has been shown. This fact is used to build predictors of crashes and critical events phenomena on the examples of all the patterns recorded in the time series of the key cryptocurrency Bitcoin, the effectiveness of the proposed indicators-precursors of these falls has been identified. From positions, attained by modern theoretical physics the concept of economic Planck’s constant has been proposed. The theory on the economic dynamic time series related to the cryptocurrencies market has been approved. Then, combining the empirical cross-correlation matrix with the random matrix theory, we mainly examine the statistical properties of cross-correlation coefficient, the evolution of the distribution of eigenvalues and corresponding eigenvectors of the global cryptocurrency market using the daily returns of 24 cryptocurrencies price time series all over the world from 2013 to 2018. The result has indicated that the largest eigenvalue reflects a collective effect of the whole market, and is very sensitive to the crash phenomena. It has been shown that both the introduced economic mass and the largest eigenvalue of the matrix of correlations can act like quantum indicator-predictors of falls in the market of cryptocurrencies.

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Author information

Authors and Affiliations

  1. Kryvyi Rih State Pedagogical University, 54 Gagarina Ave, Kryvyi Rih, 50086, Ukraine

    Vladimir N. Soloviev & Andriy Belinskiy

Authors
  1. Vladimir N. Soloviev
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  2. Andriy Belinskiy
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Corresponding author

Correspondence to Andriy Belinskiy .

Editor information

Editors and Affiliations

  1. Zaporizhzhya National University, Zaporizhzhia, Ukraine

    Vadim Ermolayev

  2. Universidad Politecnica de Madrid, Boadilla del Monte, Madrid, Spain

    Mari Carmen Suárez-Figueroa

  3. Lviv Polytechnic National University, Lviv, Ukraine

    Vitaliy Yakovyna

  4. Institute of Applied Informatics, Alpen-Adria-Universität Klagenfurt, Klagenfurt, Austria

    Heinrich C. Mayr

  5. Department of Theory and Technology of Programming, Taras Shevchenko National University of Kyiv, Kyiv, Ukraine

    Mykola Nikitchenko

  6. Kherson State University, Kherson, Ukraine

    Aleksander Spivakovsky

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Soloviev, V.N., Belinskiy, A. (2019). Complex Systems Theory and Crashes of Cryptocurrency Market. In: Ermolayev, V., Suárez-Figueroa, M., Yakovyna, V., Mayr, H., Nikitchenko, M., Spivakovsky, A. (eds) Information and Communication Technologies in Education, Research, and Industrial Applications. ICTERI 2018. Communications in Computer and Information Science, vol 1007. Springer, Cham. https://doi.org/10.1007/978-3-030-13929-2_14

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  • DOI: https://doi.org/10.1007/978-3-030-13929-2_14

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