Cryptocurrencies or Capital Markets. Comparative Analysis of Investment Efficiency in 2011-2020

Abstract

Cryptocurrencies have become an important element of the global financial system and a frequent investment tool in the last decade. The aim of this paper is to compare the efficiency of investments in the cryptocurrency market with investments in global capital markets. The study used the quotations of the analyzed instruments in the years 2011-2020. The investment efficiency was estimated using Sharpe and Sortino ratios. Research has shown that investments in cryptocurrencies were the most effective. They brought, on average, the highest daily rates of return, but on the other hand, they were characterized by the highest risk. Such a result could have been significantly influenced by the widespread persistence of ultra-low interest rates and a decline in the attractiveness of debt securities. The best results were obtained for investments in bitcoin and ethereum, which have the largest share of cryptocurrency market capitalization.

The implication of cryptocurrency volatility on five largest African financial system stability

“…This present study is interested in two specific strands of literature. The first focuses on determining whether cryptocurrency is a diversifier, hedge, or safe haven for the traditional financial system (Bouri et al 2020;Okorie and Lin 2020;Kumah and Mensah 2020;Majdoub et al 2021;Kozak and Gajdek 2021;Lavelle et al 2021;Iyer 2022).…”

“…Several studies revealed that cryptocurrency acts as a diversifier to other stock portfolios and traditional financial instruments, given the low but positive correlation between instruments from the two markets (Okorie and Lin 2020;Majdoub et al 2021;Kozak and Gajdek 2021;Lavelle et al 2021). Most of these studies found cryptocurrency to have higher returns with higher risk.…”