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Entropy
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Cryptocurrency Behavior under Econophysics Approaches
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Cryptocurrency Behavior under Econophysics Approaches

A special issue of Entropy (ISSN 1099-4300). This special issue belongs to the section "Multidisciplinary Applications".

Deadline for manuscript submissions: 30 June 2024 | Viewed by 8175

Special Issue Editors

Prof. Dr. Paulo Ferreira

E-Mail Website
Guest Editor
VALORIZA—Research Center for Endogenous Resource Valorization; Instituto Politécnico de Portalegre, 7300-555 Portalegre, Portugal
Interests: econophysics; financial markets; time series analysis; financial contagion; financial integration
Special Issues, Collections and Topics in MDPI journals
Dr. Andreia Dionísio

E-Mail Website
Guest Editor
Center for Advanced Studies in Management and Economics (CEFAGE), Department of Management, University of Évora, Largo dos Colegiais, 2, 7004- 516 Évora, Portugal
Interests: econophysics; data analysis; nonlinear dependence; maximum entropy estimation; non-linear time series; financial markets behaviour
Special Issues, Collections and Topics in MDPI journals
Dr. Dora Almeida

E-Mail Website
Guest Editor
CEFAGE, IIFA, Universidade de Évora, Largo dos Colegiais 2, 7004-516 Évora, Portugal
Interests: cryptocurrencies; econophysics; financial markets; financial contagion; financial integration
Dr. Isabel Vieira

E-Mail Website
Guest Editor
CEFAGE, IIFA, Universidade de Évora, Largo dos Colegiais 2, 7004-516 Évora, Portugal
Interests: financial integration; international finance; economic integration; economics of education and higher education policies

Special Issue Information

Dear Colleagues,

Cryptocurrencies are relatively new and innovative financial assets. Bitcoin, the first decentralized cryptocurrency, was launched in 2009, in an attempt to circumvent financial institutions. The vast number of new cryptocurrencies created since then has attracted a large amount of attention from the media, investors and academics, and cryptocurrencies have become a relevant segment of the global financial market. Many studies have already explored facets of the cryptocurrency market behavior, evolution and future perspectives, but much remains unknown. There are still many conceptual and methodological issues that require further research.

In this Special Issue, we are mainly interested in exploring methodological approaches capable of tackling this market’s complex dynamics, its level of integration and efficiency, and its reaction to financial and non-financial shocks (pandemics, wars, etc.). Of special interest are analyses employing econophysics techniques, methodologies related to information theory (e.g., entropy, transfer entropy, and mutual information), fractal and multifractal analysis, statistical physics approaches, and complex networks, among others.

We invite researchers to contribute original research articles dealing with the theories, practices, and applications within cryptocurrency markets.

Prof. Dr. Paulo Ferreia
Dr. Andreia Dionísio
Dr. Dora Almeida
Dr. Isabel Vieira
Guest Editors

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Entropy is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 2600 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • cryptocurrency markets
  • econophysics
  • entropy
  • information theory
  • rare events
  • nonlinear dynamics
  • complex systems
  • investor behavior
  • market efficiency
  • financial integration
  • uncertainty

Published Papers (4 papers)

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Research

19 pages, 4391 KiB  
Article
Thermodynamic Analysis of Financial Markets: Measuring Order Book Dynamics with Temperature and Entropy
by Haochen Li, Yue Xiao, Maria Polukarov and Carmine Ventre
Entropy 2024, 26(1), 24; https://doi.org/10.3390/e26010024 - 25 Dec 2023
Viewed by 1300
Abstract
This study bridges finance and physics by applying thermodynamic concepts to model the limit order book (LOB) with high-frequency trading data on the Bitcoin spot. We derive the measures of Market Temperature and Market Entropy from the kinetic and potential energies in the [...] Read more.
This study bridges finance and physics by applying thermodynamic concepts to model the limit order book (LOB) with high-frequency trading data on the Bitcoin spot. We derive the measures of Market Temperature and Market Entropy from the kinetic and potential energies in the LOB to provide a deeper understanding of order activities and market participant behavior. Market Temperature emerges as a robust indicator of market liquidity, correlating with liquidity measures such as Active Quote Volume, bid–ask spread and match volume. Market Entropy, on the other hand, quantifies the degree of disorder or randomness in the LOB, providing insights into the instantaneous volatility of price in the high-frequency trading market. Our empirical findings not only broaden the theoretical framework of econophysics but also enhance comprehensive understanding of the market microstructure and order book dynamics. Full article
(This article belongs to the Special Issue Cryptocurrency Behavior under Econophysics Approaches)
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35 pages, 6984 KiB  
Article
The Impact of COVID-19 on Weak-Form Efficiency in Cryptocurrency and Forex Markets
by Pavlos I. Zitis, Shinji Kakinaka, Ken Umeno, Stavros G. Stavrinides, Michael P. Hanias and Stelios M. Potirakis
Entropy 2023, 25(12), 1622; https://doi.org/10.3390/e25121622 - 05 Dec 2023
Cited by 1 | Viewed by 1255
Abstract
The COVID-19 pandemic has had an unprecedented impact on the global economy and financial markets. In this article, we explore the impact of the pandemic on the weak-form efficiency of the cryptocurrency and forex markets by conducting a comprehensive comparative analysis of the [...] Read more.
The COVID-19 pandemic has had an unprecedented impact on the global economy and financial markets. In this article, we explore the impact of the pandemic on the weak-form efficiency of the cryptocurrency and forex markets by conducting a comprehensive comparative analysis of the two markets. To estimate the weak-form of market efficiency, we utilize the asymmetric market deficiency measure (MDM) derived using the asymmetric multifractal detrended fluctuation analysis (A-MF-DFA) approach, along with fuzzy entropy, Tsallis entropy, and Fisher information. Initially, we analyze the temporal evolution of these four measures using overlapping sliding windows. Subsequently, we assess both the mean value and variance of the distribution for each measure and currency in two distinct time periods: before and during the pandemic. Our findings reveal distinct shifts in efficiency before and during the COVID-19 pandemic. Specifically, there was a clear increase in the weak-form inefficiency of traditional currencies during the pandemic. Among cryptocurrencies, BTC stands out for its behavior, which resembles that of traditional currencies. Moreover, our results underscore the significant impact of COVID-19 on weak-form market efficiency during both upward and downward market movements. These findings could be useful for investors, portfolio managers, and policy makers. Full article
(This article belongs to the Special Issue Cryptocurrency Behavior under Econophysics Approaches)
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10 pages, 1311 KiB  
Article
Predicting Bitcoin Prices Using Machine Learning
by Athanasia Dimitriadou and Andros Gregoriou
Entropy 2023, 25(5), 777; https://doi.org/10.3390/e25050777 - 10 May 2023
Cited by 1 | Viewed by 2992
Abstract
In this paper we predict Bitcoin movements by utilizing a machine-learning framework. We compile a dataset of 24 potential explanatory variables that are often employed in the finance literature. Using daily data from 2nd of December 2014 to July 8th 2019, we build [...] Read more.
In this paper we predict Bitcoin movements by utilizing a machine-learning framework. We compile a dataset of 24 potential explanatory variables that are often employed in the finance literature. Using daily data from 2nd of December 2014 to July 8th 2019, we build forecasting models that utilize past Bitcoin values, other cryptocurrencies, exchange rates and other macroeconomic variables. Our empirical results suggest that the traditional logistic regression model outperforms the linear support vector machine and the random forest algorithm, reaching an accuracy of 66%. Moreover, based on the results, we provide evidence that points to the rejection of weak form efficiency in the Bitcoin market. Full article
(This article belongs to the Special Issue Cryptocurrency Behavior under Econophysics Approaches)
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18 pages, 1344 KiB  
Article
COVID-19 Effects on the Relationship between Cryptocurrencies: Can It Be Contagion? Insights from Econophysics Approaches
by Dora Almeida, Andreia Dionísio, Isabel Vieira and Paulo Ferreira
Entropy 2023, 25(1), 98; https://doi.org/10.3390/e25010098 - 03 Jan 2023
Cited by 4 | Viewed by 1619
Abstract
Cryptocurrencies are relatively new and innovative financial assets. They are a topic of interest to investors and academics due to their distinctive features. Whether financial or not, extraordinary events are one of the biggest challenges facing financial markets. The onset of the COVID-19 [...] Read more.
Cryptocurrencies are relatively new and innovative financial assets. They are a topic of interest to investors and academics due to their distinctive features. Whether financial or not, extraordinary events are one of the biggest challenges facing financial markets. The onset of the COVID-19 pandemic crisis, considered by some authors a “black swan”, is one of these events. In this study, we assess integration and contagion in the cryptocurrency market in the COVID-19 pandemic context, using two entropy-based measures: mutual information and transfer entropy. Both methodologies reveal that cryptocurrencies exhibit mixed levels of integration before and after the onset of the pandemic. Cryptocurrencies displaying higher integration before the event experienced a decline in such link after the world became aware of the first cases of pneumonia in Wuhan city. In what concerns contagion, mutual information provided evidence of its presence solely for the Huobi Token, and the transfer entropy analysis pointed out Tether and Huobi Token as its main source. As both analyses indicate no contagion from the pandemic turmoil to these financial assets, cryptocurrencies may be good investment options in case of real global shocks, such as the one provoked by the COVID-19 outbreak. Full article
(This article belongs to the Special Issue Cryptocurrency Behavior under Econophysics Approaches)
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