Open AccessFollowness of Altcoins in the Dominance of Bitcoin: A Phase Analysis
Author(s) -
Abhinandan Kulal
Publication year - 2021
Publication title -
macro management and public policies
Language(s) - English
Resource type - Journals
ISSN - 2661-3360
DOI - 10.30564/mmpp.v3i3.3589
Subject(s) - dominance (genetics) , cryptocurrency , cointegration , speculation , economics , econometrics , computer science , macroeconomics , biology , computer security , biochemistry , gene
Due to the transparency, simplicity, and blockchain system, cryptocurrencies gained popularity in the modern world. This led to more use of cryptocurrencies for speculation and investment rather than a medium of exchange. It is crucial to analyse the nature of the crypto market before investing in such currencies. With this intention, the paper tried to know the extent of following (Followness) of altcoins to the bitcoin in the different dominance phases like High Dominance, Low Dominance, and Moderate Dominance. For this purpose, daily closing prices of the Bitcoin and five major altcoins (Ethereum, Litecoin, Namecoin, Doge, and Ripple) are collected for the last five years and analyse the relationship between bitcoin and altcoins. Pearson's correlation coefficient test is used to know the direction of the relationship, and Vector Error Correction Model is used to see the extent of the relation. In general, the empirical result of the study showed cointegration between bitcoin and Altcoin. It also depicted that Altcoin showed a high level of followness in the moderate dominance phase and low followness in the low dominance phase. The study developed a price estimation equation to predict the price of altcoins depending upon the price of bitcoin and its dominance in the crypto market. This paper concludes that the dominance of Bitcoin also has a significant role in the price movement of altcoins.