Correlation between capital markets and cryptocurrency: impact of the coronavirus

Kanyawut Ariya, Somsak Chanaim, Ahmad Yahya Dawod

Abstract


The objective of the study is to use daily Thai data analysis to strengthen correlations between Bitcoin and conventional asset measurements. The most popular asset prices and indices include gold, oil, the SET50 index, Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Ripple (XRP), Dashcoin (DASH), Stellar Lumens (XLM), Binance coin (BNB), and Dogecoin (DOGE). We find a significant correlation between cryptocurrencies and the digital economy using a matrix approach to the Pearson correlation coefficient. With the help of a minimal spanning tree model and random matrix theory, we can determine the shortest route between assets. Yet, as predicted, only a small percentage of the greatest eigenvalues diverge. We are also developing a novel technique to find the SET-50 index. In an investment portfolio during the coronavirus period, alternatives to the gold price and the DOGE may offer possibilities for risk diversification.


Keywords


Capital market; correlation matrix; cryptocurrencies; digital asset pricing; minimum spanning tree

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DOI: http://doi.org/10.11591/ijece.v13i6.pp6637-6645

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International Journal of Electrical and Computer Engineering (IJECE)
p-ISSN 2088-8708, e-ISSN 2722-2578

This journal is published by the Institute of Advanced Engineering and Science (IAES) in collaboration with Intelektual Pustaka Media Utama (IPMU).