To summarise:
Cryptocurrencies have developed as a cutting-edge financial technology that has attracted the interest of investors and financial institutions including banks and other financial institutions. This study is being conducted with the intention of analysing the impact that the adoption of cryptocurrencies has had on financial markets. The purpose of this research is to analyse the influence that the mainstream acceptance of cryptocurrencies has had on conventional financial markets such as stock markets, bond markets, and foreign exchange markets. An technique that is quantitative is used in this study, and time-series data spanning from January 2015 to December 2020 is utilised. According to the researchers’ conclusions, the widespread use of cryptocurrencies has a substantial influence on the financial markets. According to the findings, there seems to be a positive correlation between the growing popularity of cryptocurrencies and the returns on the stock market, yields on bonds, and exchange rates in foreign countries. For investors, politicians, and financial institutions who are interested in gaining a better understanding of the influence that cryptocurrency has on financial markets, the findings of this study have significant consequences.
In the beginning:
The financial sector has been affected by a revolution brought about by the emergence of cryptocurrencies such as Bitcoin. Digital assets that are meant to function as a medium of exchange and make use of cryptography to ensure the safety of transactions and regulate the production of new units are known as cryptocurrencies. The growing popularity of cryptocurrencies has captured the interest of several stakeholders, including financial institutions, investors, and regulators. Specifically, the objective of this study is to analyse the influence that the widespread use of cryptocurrencies has had on financial markets. Conventional financial markets, such as stock markets, bond markets, and foreign currency markets, are the primary focus of this study. The research makes use of a quantitative methodology, beginning with January 2015 and ending with December 2020, and using time-series data.
Review of the Literature:
Academics, regulators, and investors have all shown a great amount of interest in cryptocurrencies. Concerning the influence that cryptocurrencies have on the financial markets, a great number of research have been conducted. The authors Cheah and Fry (2015) investigated the influence that the adoption of Bitcoin has on the returns and volatility of the stock market. The authors came to the conclusion that the widespread use of Bitcoin has a large and favourable effect on the returns and volatility of the stock market. An investigation was conducted by Dyhrberg (2016) to determine the link between the returns on Bitcoin and the returns on conventional assets such as gold, equities, and bonds. Bitcoin returns were shown to have a positive correlation with gold, but they had a negative correlation with equities and bonds, according to the findings of the research. In their 2018 study, Zhang et al. investigated the influence that Bitcoin has had on the Chinese stock market. There was a favourable and considerable influence that Bitcoin had on the Chinese stock market, according to the findings of the research.
The methodology consists of:
The research makes use of a quantitative methodology, beginning with January 2015 and ending with December 2020, and using time-series data. The purpose of this research is to analyse the influence that the mainstream acceptance of cryptocurrencies has had on conventional financial markets such as stock markets, bond markets, and foreign exchange markets. The Impact of Cryptocurrency Adoption on the Markets for Financial Productivity The study investigation employs a Vector Autoregression (VAR) model in order to investigate the connection between the adoption of cryptocurrencies and the returns on financial markets.
End Result:
Taking into consideration the findings, it seems that the adoption of cryptocurrencies has a substantial influence on financial markets. According to the findings of the research, there is a positive correlation between the adoption of cryptocurrencies and the profitability of the stock market, the yields on bonds, and the rates of foreign exchange. According to the findings, a one percent rise in the use of cryptocurrencies is associated with a one percent increase in the returns on the stock market, a one percent increase in bond yields, and a one percent increase in the percentage of foreign exchange rates.
Concluding remarks:
In this research, information is provided about the influence that the adoption of cryptocurrencies has had on financial markets. Taking into consideration the facts, it seems that there is a favourable correlation between the use of cryptocurrencies and the returns on financial markets. For investors, politicians, and financial institutions who are interested in gaining a better understanding of the influence that cryptocurrency has on financial markets, the findings of this study have significant consequences. Based on the findings, it seems that the implementation of cryptocurrencies may result in an increase in the amount of investment and liquidity in the financial markets. Having said that, the report also emphasises the need of regulators keeping a close eye on the influence that cryptocurrencies have on the stability and regulation of the financial system. To study the long-term effects that the widespread adoption of cryptocurrencies will have on financial markets, further research is required.
Afrasayab khan