ANALYSIS OF INVESTMENT ATTRACTIVENESS OF CRYPTOCURRENCY UNDER CONDITIONS OF ECONOMIC SHOCKS BASED ON ELLIOT WAVE THEORY

Main Article Content

Yevhenii KYRYLIUK
Stanislav MUNKA

Abstract

Introduction. The development of society and globalization contribute to the development of the information society and the emergence of new forms of money and assets. This form of asset can be considered a cryptocurrency. Despite the refusal of a number of countries to recognize the legality of cryptocurrencies, more and more investors are investing in cryptocurrencies. This is due to the rapid development of the blockchain system and the growing value of cryptocurrencies in the world market. It is the interest of investors that motivates researchers to research relevant assets for similarities with traditional assets. In order to understand their behavior and predict future market values. Applying Elliott's wave theory to cryptocurrency time series will help identify their commonalities and differences with the traditional stock market.


Purpose. The study aims to explore the behavior of the cryptocurrency market using the Elliott Wave Theory.


Results. The results of the study proves the advisability of using technical analysis methods to predict the dynamics of the development of the cryptocurrency market development. The article compares the cryptocurrency market with the traditional stock market. For this purpose, one of the classic methods of technical analysis was applied, namely The Elliott Wave Theory, and Elliott Waves were superimposed on the time series of cryptocurrencies. The general and distinctive features of the new market from the traditional stock market are investigated based on the behavior of the waves. The expediency of using technical analysis for the cryptocurrency market was determined. The effectiveness of the Elliott Theory was proven, both at the super cycle level and at the level of the cycle of dynamic values ​​of cryptocurrencies. The article explores the dynamic significance of the development of three cryptocurrencies: Bitcoin, Ethereum and Ripple and highlights their differences when applying the Wave Theory. The forecast values ​​for future periods for the respective cryptocurrencies were calculated based on the polynomial trend line.


Originality. A key method of technical analysis for the dynamics of a new market was applied, trends in the development of the three largest cryptocurrencies from inception to the present day were analyzed, and forecasts for future periods were developed.


Conclusions. The cryptocurrency market develops as the stock market that is, based on a wave model. The main differences of the new market are high volatility, lack of legal regulatory framework and risks of hacker theft. The study proves the possibility of using the Elliott Wave Theory to explain the dynamics of the development of cryptocurrencies. In the dynamics of time series, it is traced the presence of a complete cycle of the Wave Theory, that is, all 8 waves. Some cryptocurrencies are fully consistent with the wave pattern, and some are only partially. The new market is difficult to understand and predict and requires partial improvement of modern methods of technical analysis. After all, the influence of changing phenomena has a greater impact on it in comparison with traditional markets. Despite the risks, investors could consider the cryptocurrency market for making investments, because the risks are directly proportional to the possible income.

Article Details

Section
Статті
Author Biographies

Yevhenii KYRYLIUK, Bohdan Khmelnytsky National University of Cherkasy

Dr. Sc. (Economics), Professor,

Bohdan Khmelnytsky National University of Cherkasy, Cherkasy, Ukraine

Stanislav MUNKA, Bohdan Khmelnytsky National University of Cherkasy

PhD student,

Bohdan Khmelnytsky National University of Cherkasy, Cherkasy, Ukraine

References

Galushka Ye., Pakon O. (2017). The essence of cryptocurrencies and prospects for their development. Molodyy vchenyy [Young scientist], 4(44), 634–638.

Filipov Ye. (2017). Cryptocurrency from "A" to "I". URL: http://el.tfi.uz/images/Kriptovalyuta_ot_a_do_ya.pdf (Accessed: 12.08.2021).

Precter R., Frost A. (2018). Elliott's wave principle: The key to understanding the market. Moscow: Alpina - Publisher, 268 p. (in Rus).

Maslennikov Ye., Danilov R. (2017). Bitcoin as an innovative means of investment activities of national economies. Innovatsiyna ekonomika: teoretychni ta praktychni aspekty [Innovative economics: theoretical and practical aspects], 392–405 (in Ukr).

Fertikova T., Stetsenko A. (2020). Bitcoin as money, commodity and exchange assets. Stratehiya ekonomichnoho rozvytku Ukrayiny [Strategy of economic development of Ukraine], № 47, 106–117 (in Ukr).

D’Angelo E., Grimaldi G. (2017). The Effectiveness of the Elliott Waves Theory to Forecast Financial Markets: Evidence from the Currency Market. International Business Research, Vol.10, № 6, 1–18.

Yahoo finance (2020). Financial information provider. URL: https://finance.yahoo.com/ (Accessed 06.08.2021).

Okhrimenko I., Troshchenko I. (2019). Features of risks of investing in cryptocurrencies. Development of banking services and innovations in the digital economy: Proceedings of the II All-Ukrainian scientific-practical Internet conference, 230–233 (in Ukr).

Malevsky Ye. (2018). On the risks of investing in cryptocurrencies. Collection of abstracts of the III All-Ukrainian scientific-practical Internet conference, 505–507.

Kyung-Soo J., Ziyuan R., Budavari T., Sharma A. (2019). Cryptocurrency Investing Examined. The JBBA, Volume 2, Issue 2, 1–12.

Mandryk V., Moroz V. (2019). Legislative regulation of cryptocurrency circulation in Ukraine, problems and prospects of their development. Naukovyy visnyk NLTU Ukrayiny [Scientific Bulletin of NLTU of Ukraine], № 4 (vol. 29), 67–71.

Demyaniuk M. (2020). How cryptocurrencies are regulated in the world and when to expect it in Ukraine. URL: https://www.epravda.com.ua/rus/columns/2020/12/1/668690/ (Accessed: 12.08.2021).