The Explosion of Cryptocurrencies: A Black Hole Analogy

Ballis, A., Drakos, K. The explosion in cryptocurrencies: a black hole analogy. Financ Innov 7, 8 (2021). https://doi.org/10.1186/s40854-020-00222-0

8 Pages Posted: 8 May 2020 Last revised: 26 May 2022

See all articles by Antonis Ballis

Antonis Ballis

Aston Business School, Aston University

Konstantinos Drakos

Athens University of Economics and Business - Department of Accounting and Finance

Date Written: 2020

Abstract

Using an analogy between finance and astrophysics, this study aims to investigate whether there exists a mechanism that can describe the explosive increase in the number of traded cryptocurrencies and the cryptocurrency market in general. In physics, the Schwarzschild radius indicates that black holes are constantly expanding because of their mass increase. Enriching this analogy, we consider the cryptocurrency market as a self-gravitational body whose mass is denoted by (1) the number of traded cryptocurrencies and (2) in terms of increasing market capitalization for a given number of traded cryptocurrencies. By analyzing weekly snapshot data of all traded cryptocurrencies from January 4, 2009, to June 14, 2020, we find evidence that the above-mentioned mechanism exists. The results clearly indicate the self-gravitational property of the cryptocurrency market, which is direct evidence toward the hypothesis that the changes in the traded cryptocurrencies are a positive function of the previous period’s number of traded cryptocurrencies.

Keywords: Bitcoin, Cryptocurrencies, Econophysics, Negative Specific Heat, Thermodynamic Disequilibrium

JEL Classification: G14, G15, G23

Suggested Citation

Ballis, Antonis and Drakos, Konstantinos, The Explosion of Cryptocurrencies: A Black Hole Analogy (2020). Ballis, A., Drakos, K. The explosion in cryptocurrencies: a black hole analogy. Financ Innov 7, 8 (2021). https://doi.org/10.1186/s40854-020-00222-0, Available at SSRN: https://ssrn.com/abstract=3575550 or http://dx.doi.org/10.2139/ssrn.3575550

Antonis Ballis (Contact Author)

Aston Business School, Aston University ( email )

United Kingdom

Konstantinos Drakos

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission Street
GR-104 34 Athens
Greece

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