FACTORS INFLUENCING THE VOLATILITY OF CRYPTOCURRENCY AND THEIR RELATIONSHIP WITH THE STOCK MARKET

Abstract

This study analysed the certain features of cryptocurrencies connect to their ups and downs alongside traditional assets. It assessed how specific traits of some cryptos shape their volatility and how they move in synchronize with stock markets. To get a clear picture, the research compares the top 100 cryptocurrencies with eight major stock markets. Cointegration analysis and Granger causality tests had been applied to find hedge effects and co-movement. The logistic regression models found out the crypto-specific features really drive their dynamics. This research found that consensus and scarcity powerfully impact the co-movements. This study also highlighted the features and potential of cryptocurrencies that can dramatically alter the demand or perception towards them. These characteristics are rooted in finance theory and may alter the flexibility of cryptocurrencies, which has implications for demand, price, hedging efficiency and return relative to stocks’ return.