A STUDY OF THE MOST RECENT QUARTERLY RETURNS FROM THREE CRYPTOCURRENCIES WITH FOCUS ON THEIR SHORT-TERM AND LONG-TERM STABILITY AND VIABILITY

V. Reddy Dondeti, Norfolk State University, Norfolk, Virginia, U.S.A.
Carl B. McGowan, Norfolk State University, Norfolk, Virginia, U.S.A.
Bidhu B. Mohanty, Norfolk State University, Norfolk, Virginia, U.S.A.

Published in

JOURNAL OF INTERNATIONAL FINANCE AND ECONOMICS
Volume 18, Issue 4, p29-40, December 2018

ABSTRACT

The first cryptocurrency, called bitcoin, made its debut on October 31, 2008 in the midst of the financial crisis of 2007-2009. Ten years later, as of October 31, 2018, it is estimated that more than 1600 cryptocurrencies are traded on different private exchanges, some in large volumes, and others not even worth mentioning. The most significant point to be noted about the cryptocurrencies is that they have no intrinsic value, neither have they been approved as official currency by any of the countries in the world. At its inception, the bitcoin was considered worthless and the main goal of its creators was to facilitate the transfer of money anonymously without the control or intervention of any financial institution or government. However, as of November 9, 2018, the market price of a bitcoin was higher than 6000 U.S. dollars. In this paper, we study the most recent quarterly returns from three cryptocurrencies with focus on their short-term and long-term viability. For our study, we have selected bitcoin, ethereum and litecoin, primarily based on their current prices, bitcoin in the higher price range, ethereum in the middle, and litecoin in the lower price range. In the short-term, during the last two months, their prices have been relatively stable and people who bought them before January 2017, have realized sizable gains. However, their prices during the last two years have been highly volatile and therefore, our conclusion is that their long-term stability is highly uncertain and may be extremely risky for new investors.

Keywords

Cryptocurrency, Bitcoin, Ethereum, Litecoin, price volatility, quarterly returns


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