Investment models on centralized and decentralized cryptocurrency markets

User Rating:  / 0
PoorBest 

Authors:


Zatonatska Tetiana, orcid.org/0000-0001-9197-0560, Taras Shevchenko National University of Kyiv, Kyiv, Ukraine, e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Suslenko Volodymyr, orcid.org/0000-0002-6074-5034, West Ukrainian National University, Ternopil, Ukraine, e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Dluhopolskyi Oleksandr, orcid.org/0000-0002-2040-8762, West Ukrainian National University, Ternopil, Ukraine; University of Economics and Innovation (WSEI), Lublin, the Republic of Poland, e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Brych Vasyl, orcid.org/0000-0002-4277-5213, West Ukrainian National University, Ternopil, Ukraine, e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

Dluhopolska Tetiana, orcid.org/0000-0003-1925-963X, West Ukrainian National University, Ternopil, Ukraine, e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.


повний текст / full article



Naukovyi Visnyk Natsionalnoho Hirnychoho Universytetu. 2022, (1): 177 - 182

https://doi.org/10.33271/nvngu/2022-1/177



Abstract:



Purpose.
Significant capital inflows in the cryptocurrency market and record-breaking prices on cryptocurrency assets have led to the creation of alternative investment options on cryptocurrency markets, including a new field of decentralized investing, known as decentralized finance, operating on smart contracts. The objective of this study is to review investment options in the industry sector available to investors on cryptocurrency markets and decentralized protocols.


Methodology.
The model of decentralized cryptocurrency exchanges was used in the article. It is based on providing liquidity into the liquidity pool.


Findings.
The results of this study demonstrate that new industrial cryptocurrency investors have a wide range of investment options that can outperform strategies like passive holding of cryptocurrency or investing in the stock. Given the liquidity mining model attracts early investors, they need to look at assets such as governance tokens of different platforms. The Sharpe ratio of COMP and UNI tokens is higher than S&P500. In addition, these tokens are mined via a liquidity mining model.


Originality.
The crypto market has been growing rapidly since the beginning of the pandemic. The calculations for crypto assets might be influenced by the bull run on the crypto market because the last time such high Sharpe ratio for BTC and ETH was observed during the 20172018 cryptocurrency bubble. Investing in the crypto market is riskier than investing in the stock market due to high operational risks. Crypto market investors might prefer to mine or buy UNI or COMP tokens to diversify their portfolios.


Practical value.
According to the analysis results of the received information, a Sharpe ratio of investments in protocols for loanable funds is lower compared to investment options on the stock market or CeFi lending. It is also potentially riskier due to volatile interest rates and high operational risks.



Keywords:
investment models, cryptocurrency, AMM, PFL, DEX, LP, interest rate, risk

References.


1. Baur, D.G., & Dimpfl, T. (2021). The volatility of Bitcoin and its role as a medium of exchange and a store of value. Empirical Economics, 61(5), 2663-2683. https://doi.org/10.1007/s00181-020-01990-5.

2. Eisenbarth, J.-Ph., Cholez, T., & Perrin, O. (2021). A comprehensive study of the Bitcoin P2P network. 3rd Conference on Blockchain Research & Applications for Innovative Networks and Services (BRAINS 2021), (pp. 8-15). Paris, France, Retrieved from https://hal.inria.fr/hal-03380595.

3. Binaluyo, J.P., Pelo, J.L., Reyes, A.C., & Yumul, M.H. (2020). Cryptocurrency as medium of exchange and its applicability in the Philippine accounting standards. International Journal of Psychosocial Rehabilitation, 24(8), 645-653. https://doi.org/10.37200/IJPR/V24I8/PR280067.

4. Beck, J. (2021). Store of value: why crypto wont replace gold. Builtin. Retrieved from: https://builtin.com/finance/crypto-wont-replace-gold.

5. Angel, J.J., & McCabe, D. (2015). The ethics of payments: paper, plastic, or Bitcoin? Journal of Business Ethics, 132, 603-611. https://doi.org/10.1007/s10551-014-2354-x.

6. Gudgeon, L., Werner, S., Perez, D., & Knottenbelt, W. (2020). DeFi protocols for loanable funds: interest rates, liquidity and market efficiency. AFT20: Proceedings of the 2nd ACM Conference on Advances in Financial Technologies, 92-112. https://doi.org/10.1145/3419614.3423254.

7. Polasik, M., Piotrowska, A.I., Wisnewski, T.P., Kotkowski, R., & Lightfoot, G. (2015). Price fluctuations and the use of Bitcoin: an empirical inquiry. International Journal of Electronic Commerce, 20(1), 9-49. https://doi.org/10.1080/10864415.2016.1061413.

8. The Blockchain trilemma: fast, secure, and scalable networks (2021). Retrieved from https://www.gemini.com/cryptopedia.

9. Farion, A., Dluhopolskyi, O., Banakh, S., Moskaliuk, N., Farion,M., & Ivashuk, Y. (2019). Using blockchain technology for boost cyber security. 9th International Conference on Advanced Computer Information Technologies, (pp. 452-455). Ceske Budejovice, Czech Republic. https://doi.org/10.1109/ACITT.2019.8780019.

10. Fedirko, O.T., Zatonatska, T., Dluhopolskyi, O., & Londar, S. (2021). The impact of e-commerce on the sustainable development: case of Ukraine, Poland, and Austria. IOP Conference Series: Earth and Environmental Science, 915, (ISCES) International Conference on Environmental Sustainability in Natural Resources Management. Odesa, Ukraine. https://doi.org/10.1088/1755-1315/915/1/012023.

11. Ante, L. (2021). How Elon Musks Twitter activity moves cryptocurrency markets. https:// doi.org/10.2139/ssrn.3778844.

12. Savelyev, A. (2016). Contract law 2.0: Smart contracts as the beginning of the end of classic contract law. Higher School of Economics Research Paper, 71. https:// doi.org/10.2139/ssrn.2885241.

13. Maher, A., & van Moorsel, A. (2017). Blockchain-based smart contracts: a systematic mapping study. Fourth International Conference on Computer Science and Information Technology (CSIT-2017). https:// doi.org/10.5121/csit.2017.71011.

14. BlockChair (2021). Average Transaction Fee (ETH). Retrieved from https://blockchair.com/ethereum/charts/average-transaction-fee-eth.

15. Schr, F. (2021). Decentralized finance: on Blockchain- and smart contract-based financial markets. Economic Research. Second Quarter, 103(2), 153-174. https://doi.org/10.2139/ssrn.3571335.

16. Pourpouneh, M., Nielsen, K., & Ross, O. (2020). Automated market makers. IFRO Working Paper, 08. Retrieved from https://www.econstor.eu/handle/10419/222424.

17. Hertzog, E., Benartzi, G., Benartzi, G., & Ross, O. (2018). Bancor protocol: continuous liquidity for cryptographic tokens through their smart contracts. https://doi.org/10.5281/zenodo.1466731.

18. Velner, Y., Teutsch, J., & Luu, L. (2017). Smart contracts make Bitcoin mining pools vulnerable. Lecture Notes in Computer Science. https://doi.org/10.1007/978-3-319-70278-0_19.

19. Bitfinex Lending Pro (2021). Crypto Lending. Retrieved from https://support.bitfinex.com/hc/en-us/articles/900002178583-What-is-Lending-Pro-at-Bitfinex.

20.Crypto.com (2021). Earn Crypto. Retrieved from https://crypto.com/document/crypto_earn.

21. BlockFi Review (2022). Pros, cons and how it compares. Retrieved from https://www.nerdwallet.com/reviews/investing/brokers/blockfi.

22. CoinMarketCap (2021). Total Cryptocurrency Market Capitalization. Retrieved from https://coinmarketcap.com/charts.

23. LoanScan (2021). LoanScan: Compare High Interest Accounts. Retrieved from https://loanscan.io.

24. How to earn money with crypto (2021). Retrieved from https://www.binance.com/en/blog/earn.

25. DefiPulse Index (2022). Retrieved from https://coinmarketcap.com/currencies/defi-pulse-index.

26. Yearn Finance (2021). Retrieved from https://golden.com/wiki/Yearn_Finance-AMXYRVE.

 

Visitors

4659819
Today
This Month
All days
816
123284
4659819

Guest Book

If you have questions, comments or suggestions, you can write them in our "Guest Book"

Registration data

ISSN (print) 2071-2227,
ISSN (online) 2223-2362.
Journal was registered by Ministry of Justice of Ukraine.
Registration number КВ No.17742-6592PR dated April 27, 2011.

Contacts

D.Yavornytskyi ave.,19, pavilion 3, room 24-а, Dnipro, 49005
Tel.: +38 (056) 746 32 79.
e-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.
You are here: Home Archive by issue 2022 Content №1 2022 Investment models on centralized and decentralized cryptocurrency markets