Crypto Covered Interest Parity Deviations

Franz, Friedrich-Carl; Valentin, Alexander

doi:10.2139/ssrn.3702212

Cited by 3 publications

(3 citation statements)

References 24 publications

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“…1.1.3 Market Analysis of DeFi. Arising from the special nature of crypto assets, a diverse pool of literature describes cryptocurrency pricing and valuation along with mechanisms and patterns in crypto market returns, as shown in Table 1 [Franz and Valentin, 2020, Griffin and Shams, 2020, Liu and Tsyvinski, 2021, Makarov and Schoar, 2019. Our paper seeks to contribute to the understanding of what factors influence crypto market valuation and returns, especially in the realm of blockchain transactions and network effects.…”

Section: Related Literaturementioning

confidence: 99%

“…propose a new market-to-fundamental ratio based on classic monetary theory and the unique UTXO-based blockchain accounting [Liu et al, 2022a], the price to utility (PU) ratio, and use unsupervised and supervised machine learning models to predict the investment returns of bitcoin using different market-to-fundamental ratios. Franz and Valentin [2020] examine covered interest rate parity (CIP) between fiat and cryptocurrency markets using liquidity, volatility, and bid-ask spreads, and concluded that high-frequency trading improves crypto market efficiency, decreasing CIP deviations. Makarov and Schoar [2019] investigate arbitrage opportunities across different cryptocurrencies, exchanges, and countries by price deviations and decompose bitcoin returns into common and idiosyncratic components.…”

Section: Related Literaturementioning

confidence: 99%

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SoK: Blockchain Decentralization

Zhang¹,

Ma²,

Liu³

2022

Preprint

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Blockchain empowers a decentralized economy by enabling distributed trust in a peer-to-peer network. However, surprisingly, a widely accepted definition or measurement of decentralization is still lacking. We explore a systematization of knowledge (SoK) on blockchain decentralization by reviewing existing studies on various aspects of blockchain decentralization. First, we establish a taxonomy for analyzing blockchain decentralization in the five facets of consensus, network, governance, wealth, and transaction. We find a lack of research on the transaction aspects that closely characterize user behavior. Second, we apply Shannon entropy in information theory to propose a decentralization index for blockchain transactions. We show that our index intuitively measures levels of decentralization in peer-to-peer transactions by simulating blockchain token transfers. Third, we apply our index to empirically analyze the dynamics of DeFi token transfers. Intertemporally, we observe that levels of decentralization converge regardless of the initial levels of decentralization. Comparison of DeFi applications shows that exchange and lending are more decentralized than payment and derivatives. We also discover that a greater return of ether, the native coin of the Ethereum blockchain, predicts a greater decentralization level in stablecoin transfer that includes ether as collateral. Finally, we develop future research directions to explore the interactions between different facets of blockchain decentralization, the design of blockchain mechanisms that achieve sustainable decentralization, and the interplay of decentralization levels and economic factors.

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Section: Related Literaturementioning

confidence: 99%

Section: Related Literaturementioning

confidence: 99%

SoK: Blockchain Decentralization

Zhang¹,

Ma²,

Liu³

2022

Preprint

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“…Saving accounts are another well-known method for seeking greater yield on users' funds. Similar to that of a traditional bank, a user can open a crypto savings account and store their crypto or fiat currencies [52]. However, one of the important differences here is that these accounts do not have the advantage of being insured by the Federal Deposit Insurance Corporation (FDIC).…”

Section: Financial Savingmentioning

confidence: 99%

Blockchain in Financial Services: Current Status, Adaptation Challenges, and Future Vision

Mia

Rahouti

Jagatheesaperumal³

et al. 2022

Preprint

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Blockchain is undoubtedly considered one of the most innovative technologies in financial services from the past decade. Interests in blockchain technology continue to grow on a daily basis, while many promising blockchain-enabled applications and services continue to draw financial interests in the industrial sector and the broader financial services communities. Furthermore, as blockchain matures, it increases the value of a diversified range of industries and institutes with a better return on investment. However, such organizations must continue to adopt rigorous approaches to enhance their financial services and regulate their policies. In this article, we discuss the current status of blockchain-enabled financial services and applications, in addition to the impacts, implications, and regulations of incorporating blockchain technology in the finance industry. We further tackle the adaptation model for blockchain technology in global banking and provide a vision for the next generation of financial services based on this emerging technology.

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Bitcoin Under Inflation-Hedging Scrutiny - The Extended Fisher Hypothesis in Crypto

Swiatkowski

2021

SSRN Journal

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Crypto Covered Interest Parity Deviations

Cited by 3 publications

References 24 publications

SoK: Blockchain Decentralization

SoK: Blockchain Decentralization

Blockchain in Financial Services: Current Status, Adaptation Challenges, and Future Vision

Bitcoin Under Inflation-Hedging Scrutiny - The Extended Fisher Hypothesis in Crypto

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