Wits Business School (ETDs)

Permanent URI for this communityhttps://hdl.handle.net/10539/37941

Browse

Filters

2020 - 20244

Settings

Subject: search.filters.subject.Cryptocurrency

Search Results

Now showing 1 - 4 of 4
  • Thumbnail Image
    Item
    Crypto Connections: Unravelling African Stock Markets and Cryptocurrencies in the COVID-19 Era
    (University of the Witwatersrand, Johannesburg, 2024) Marcus, Howard; Odei-Mensah, Jones
    Since their introduction in 2019, cryptocurrencies have become increasingly popular in the African markets. Cryptocurrencies are seen as disruptive technology based on cryptographical technologies and do not share features related to the real economy. Based on this characteristic, one hypothesises that these assets are a perfect diversification instrument during periods of high volatility, particularly as portfolio managers look for new avenues to manage risk. The main aim of this study was broadly focused on the interdependence and co-movement relationship of cryptocurrencies and African stock markets during periods of severe market stress, such as during the COVID-19 pandemic. This study was mainly concerned with those aspects of connectedness that relate to transmission through financial markets. This study sought to examine the co-movement relationships, determine the extent of integration and establish the direction of spillover by replicating modelling techniques proposed by Diebold and Yilmaz (2009; 2012) and Barunik and Krehlik (2018). These techniques measure connectedness using a spillover index, which follows a variance decomposition approach of a vector autoregressive model. The second technique allows for the estimation of connectedness to variables because of heterogeneous frequency responses to shocks. By studying the connectedness of Bitcoin, Ethereum, Tether, Binance Coin, and XRP and the five largest African stock markets based on market capitalisation (South Africa, Nigeria, Morocco, Egypt, and Kenya), the study observed that the COVID-19 sub-sample period contributed most to connectedness at 31.79% relative to the pre-COVID period at 23.67%. The highest contributors to connectedness in both periods are Bitcoin and Ethereum, with Tether being the lowest. These results indicate that information flow mostly comes from the stock markets rather than cryptocurrencies. Also, from the frequency-domain results, across both periods, the most significant contributor to connectedness is observed in the short-term being frequency 1, accounting for 17,74% and 24.77%, and frequency 2, 4.35% and 5.16% in the pre-COVID and COVID periods respectively, while the medium- term and long-term accounting for relatively more minor proportions. Thus, contagion is highest in the short term given connectedness results, thus leading to lower diversification across the short term; however, diversification benefits are noted across more extended term periods. In addition, in the longer-term period, the change in connectedness is relatively tiny. The findings of this study suggest that cryptocurrencies could be an alternative to diversifying risk in African equities. Diversification is essential for long-term investors and regulators as they build resilience in the financial markets during a crisis. This study informs policymakers and governments on the need to regulate markets to optimise diversification, safe haven, and hedging benefits across varied market conditions
  • Thumbnail Image
    Item
    Determinants of consumers’ willingness to use cryptocurrency as a form of payment in retail
    (University of the Witwatersrand, Johannesburg, 2022-07) Potelwa, Myezo
    The outbreak of the COVID-19 pandemic has significantly increased the number of online shopping transactions and cryptocurrency has been used as payment in some of these transactions. Some retail consumers are opposed to the use of cryptocurrency and some retail consumers want to be able to use cryptocurrency as payment in retail payments. Woolworths hired Insight, the management consulting firm, to help Woolworths executives find out whether it will increase or decrease Woolworths’s revenue if Woolworths starts accepting cryptocurrency as payment. Insight conducted its research in South Africa. Research participants answered the research questions by completing questionnaires online via the Qualtrics website. People of all ages shop at Woolworths, but for ethical reasons, Insight’s research only took the responses of adult research participants (people aged 18 and over) into consideration. The research approach of this consultancy report is quantitative research. The target population consists of South African adults. This consultancy report gathers data by using questionnaires with close-ended 7-point Likert scale questions. The reliability of this research is measured by Cronbach’s alpha score. The validity of this research is determined with exploratory factor analysis, which is conducted with IBM SPSS Software. The statistical processes that are used to analyse data include multiple regression analysis, correlation analysis, t-tests and ANOVAs. The dependent variables are Gender, Age, Environmental ethics, Ethics regarding criminal activity, Technology proficiency and Customer Equity. The dependent variable is Willingness to use cryptocurrency as payment. Money, time, common method variance and common method bias are limitations of this consultancy report. The anonymity of respondents is respected. This consultancy report takes the responses of respondents who have given informed consent into consideration. This consultancy report found that even though there will be some retail consumers who are opposed to the use of cryptocurrency as payments in retail because of their environmental ethics, there are many more consumers who want to be able to use of cryptocurrency as payments in retail because of the convenience of cryptocurrency payments, the lower transaction costs of cryptocurrency payments and the reduced risk of exposure to credit card fraud and identity theft when making cryptocurrency payment
  • Thumbnail Image
    Item
    Essays on cryptocurrencies and traditional assets in emerging market economies: dynamic modelling, connectedness, and spillovers
    (2020) Omane-Adjepong, Maurice
    The last decade has experienced notable changes and unique innovations in the global financial system. In particular, the introduction of cryptocurrencies, pioneered by Bitcoin and later other alternative coins (best known as altcoins) by libertarian cryptographers after several efforts in the 1990s to usher in electronic currencies foundered, has been lauded and likewise received enormous attention worldwide, raising many concerns for governments, monetary authorities and other regulatory bodies. Originally designed as electronic cash for decentralised peer-to-peer online financial transactions, secured by cryptographic algorithms, cryptocurrency, a specialised kind of digital currency, in barely a decade of existence, is challenged with an identity crisis. The debate as to what cryptocurrency is, or has become looms in the minds of the general public, and it has been the subject of media commentary. At the same time, the limited amount of research on the topic has only raised more questions than answers. For instance, not only are the existing studies not attacking the root of the deepest questions posed by the rise of cryptocurrencies to date, but also they are not robustly studied methodologically. The depth of analysis is shallow, and the scope of the studies published on the subject matter so far is very limited, both in space and time. Additionally, the extent of the relatedness of the new digital currency market to traditional assets, especially in frontier and emerging economies remains a virgin field. This naturally raises additional concerns: does the emergence of cryptocurrencies offer any relevant economic benefits to these emerging market economies? What implications does this evolution hold for established financial systems? Answers to these questions, and many more are crucial for monetary policy effectiveness, legislation and regulation, financial system stability, the future of cryptocurrencies, and overarchingly, to illuminate the blind spots of the enthusiastic libertarian public, as well as the general investor community. iii In light of the above, this thesis makes a bold attempt at addressing some of the weaknesses of extant research, extend the frontiers of knowledge in this new financial instrument, and shed insights on cryptocurrencies in emerging market economies, proxied by those in the G20. The study produced interesting juxtapositions in three essays. The first essay examined the evolving characteristics of cryptocurrencies under five sub-themes, and presents a map for analysing the cryptocurrency market. We find that Bitcoin and the largest long-lived altcoins are collectively unique instruments that share features of paper money, security assets (mostly equities), and commodity money (such as gold and oil), making the digital currencies a “trinity-hybrid” financial instrument which could best operate under the private sector to complement emerging currencies and assets. For emerging market economies, cryptocurrencies, in our view, is a three-in-one financial instrument, if and only if its role is limited to exchange of goods and services, and helping facilitate transactions of various kinds. This, in turn, raises a number of possibilities for recalibrating the current financial architecture while addressing the regulatory changes that ought to be in place for a well-functioning diversified economy. The second empirical essay found evidence in favour of an extremely weakly correlated market, and later, multifaceted economic benefits of cryptocurrency in times where emerging market economies’ assets wander in distress. This positions the new currency market to the advantage of heterogeneous groups of emerging market investors. However, we caution that expectations of such derived economic benefits need to be examined further on a case by case basis, and in a measured manner, especially given that the cryptocurrency market is still at its embryonic stages of evolution. iv The third and final essay allays the fears of investors and market participants, and reveals for the first time that the cryptocurrency market is less influenced by existing highly integrated instruments, and has little effect on emerging markets, and consequently pose, for now, a negligible danger. At their current level of development, some economies are not yet exposed to the variety of developments in the world of electronic commerce and payment systems that make the algorithms that power the peer-to-peer decentralised ledger platforms seamless. This may change in the future. For now, we are sure that the coming into being of cryptocurrencies is an inevitable consequence of the financial sector paradigms of the last few decades, however, the distributional consequences across regions, countries and among different market participants are largely asymmetric. The insights gleaned from this study, therefore, open doors for policymakers to properly fine-tune their economies to maximise the upside potential presented by this asset class and minimise the downside risks, in the light of what has been learned about the role of cryptocurrencies so far.
  • Thumbnail Image
    Item
    Essays on cryptocurrencies and traditional assets in emerging market economies: dynamic modelling, connectedness, and spillovers
    (2021) Omane-Adjepong, Maurice
    The last decade has experienced notable changes and unique innovations in the global financial system. In particular, the introduction of cryptocurrencies, pioneered by Bitcoin and later other alternative coins (best known as altcoins) by libertarian cryptographers after several efforts in the 1990s to usher in electronic currencies foundered, has been lauded and likewise received enormous attention worldwide, raising many concerns for governments, monetary authorities and other regulatory bodies. Originally designed as electronic cash for decentralised peer-to-peer online financial transactions, secured by cryptographic algorithms, cryptocurrency, a specialised kind of digital currency, in barely a decade of existence, is challenged with an identity crisis. The debate as to what cryptocurrency is, or has become looms in the minds of the general public, and it has been the subject of media commentary. At the same time, the limited amount of research on the topic has only raised more questions than answers. For instance, not only are the existing studies not attacking the root of the deepest questions posed by the rise of cryptocurrencies to date, but also they are not robustly studied methodologically. The depth of analysis is shallow, and the scope of the studies published on the subject matter so far is very limited, both in space and time. Additionally, the extent of the relatedness of the new digital currency market to traditional assets, especially in frontier and emerging economies remains a virgin field. This naturally raises additional concerns: does the emergence of cryptocurrencies offer any relevant economic benefits to these emerging market economies? What implications does this evolution hold for established financial systems? Answers to these questions, and many more are crucial for monetary policy effectiveness, legislation and regulation, financial system stability, the future of cryptocurrencies, and overarchingly, to illuminate the blind spots of the enthusiastic libertarian public, as well as the general investor community. In light of the above, this thesis makes a bold attempt at addressing some of the weaknesses of extant research, extend the frontiers of knowledge in this new financial instrument, and shed insights on cryptocurrencies in emerging market economies, proxied by those in the G20. The study produced interesting juxtapositions in three essays. The first essay examined the evolving characteristics of cryptocurrencies under five sub-themes, and presents a map for analysing the cryptocurrency market. We find that Bitcoin and the largest long-lived altcoins are collectively unique instruments that share features of paper money, security assets (mostly equities), and commodity money (such as gold and oil), making the digital currencies a “trinity-hybrid” financial instrument which could best operate under the private sector to complement emerging currencies and assets. For emerging market economies, cryptocurrencies, in our view, is a three-in-one financial instrument, if and only if its role is limited to exchange of goods and services, and helping facilitate transactions of various kinds. This, in turn, raises a number of possibilities for recalibrating the current financial architecture while addressing the regulatory changes that ought to be in place for a well-functioning diversified economy. The second empirical essay found evidence in favour of an extremely weakly correlated market, and later, multifaceted economic benefits of cryptocurrency in times where emerging market economies’ assets wander in distress. This positions the new currency market to the advantage of heterogeneous groups of emerging market investors. However, we caution that expectations of such derived economic benefits need to be examined further on a case by case basis, and in a measured manner, especially given that the cryptocurrency market is still at its embryonic stages of evolution. The third and final essay allays the fears of investors and market participants, and reveals for the first time that the cryptocurrency market is less influenced by existing highly integrated instruments, and has little effect on emerging markets, and consequently pose, for now, a negligible danger. At their current level of development, some economies are not yet exposed to the variety of developments in the world of electronic commerce and payment systems that make the algorithms that power the peer-to-peer decentralised ledger platforms seamless. This may change in the future. For now, we are sure that the coming into being of cryptocurrencies is an inevitable consequence of the financial sector paradigms of the last few decades, however, the distributional consequences across regions, countries and among different market participants are largely asymmetric. The insights gleaned from this study, therefore, open doors for policymakers to properly fine-tune their economies to maximise the upside potential presented by this asset class and minimise the downside risks, in the light of what has been learned about the role of cryptocurrencies so far