Is There Any Influence of Other Cryptocurrencies on Bitcoin?

Abstract

In recent years, cryptocurrency or virtual currency is becoming an essential medium of exchange in consumer and domestic trading. Nevertheless, the trading values of cryptocurrency compared to real money are very uncertain and can change dramatically. This article is aimed to assess the uncertainty or volatility of cryptocurrencies, mostly on Bitcoin. In the digital currencies market, Bitcoin is a widely accepted currency. Other digital currencies of the market may influence Bitcoin. For example, Ethereum, Litecoin, Zcash, Monero, Dash and Ripple have a positive impact on Bitcoin. Previous research only focuses on Bitcoin and other markets such as stock markets, energy markets, and exchange rates. However, here we focus on interlinkages and volatility dynamics within cryptocurrency markets by applying some econometrics models. In this article, we have shown that the relationship between Bitcoin and other currencies can be modelled in the ARCH, GARCH, VAR and MGARCH framework. Forecast values of the GARCH (3,3) model are given very close to the original data. VAR stability result shows that the model is stable. Using the CCC, VCC, and DCC of the MGARCH model on daily returns from 1st January 2017 to 15th March 2019, we found significant volatility and strong correlations between the variables.