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Methods of nonlinear dynamics and the construction of cryptocurrency crisis phenomena precursors

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  • Vladimir Soloviev
  • Andrey Belinskiy

Abstract

This article demonstrates the possibility of constructing indicators of critical and crisis phenomena in the volatile market of cryptocurrency. For this purpose, the methods of the theory of complex systems such as recurrent analysis of dynamic systems and the calculation of permutation entropy are used. It is shown that it is possible to construct dynamic measures of complexity, both recurrent and entropy, which behave in a proper way during actual pre-crisis periods. This fact is used to build predictors of crisis phenomena on the example of the main five crises recorded in the time series of the key cryptocurrency bitcoin, the effectiveness of the proposed indicators-precursors of crises has been identified.

Suggested Citation

  • Vladimir Soloviev & Andrey Belinskiy, 2018. "Methods of nonlinear dynamics and the construction of cryptocurrency crisis phenomena precursors," Papers 1807.05837, arXiv.org, revised Jul 2018.
    • Handle: RePEc:arx:papers:1807.05837
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    References listed on IDEAS

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    1. Luisanna Cocco & Giulio Concas & Michele Marchesi, 2017. "Using an artificial financial market for studying a cryptocurrency market," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 12(2), pages 345-365, July.
    2. Bouri, Elie & Azzi, Georges & Dyhrberg, Anne Haubo, 2017. "On the return-volatility relationship in the Bitcoin market around the price crash of 2013," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 11, pages 1-16.
    3. Bariviera, Aurelio F., 2017. "The inefficiency of Bitcoin revisited: A dynamic approach," Economics Letters, Elsevier, vol. 161(C), pages 1-4.
    4. Mariusz Tarnopolski, 2017. "Modeling the price of Bitcoin with geometric fractional Brownian motion: a Monte Carlo approach," Papers 1707.03746, arXiv.org, revised Aug 2017.
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    Cited by:

    1. Ashe, Sinéad & Egan, Paul, 2023. "Examining financial and business cycle interaction using cross recurrence plot analysis," Finance Research Letters, Elsevier, vol. 51(C).

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