A recent study conducted by researchers from the University of Melbourne and Tsinghua University paves a new way for cryptocurrencies and other assets to find a significant position in the economic and financial ecosystem.
The paper is published by researchers Nick James and Max Menzies from the University of Melbourne and Tsinghua University respectively. The research was conducted using portfolio sampling and concluded that the crypto market is beginning to show a level of maturity similar to the traditional equities market.
Both the researchers affirmed that though there are numerous differences between cryptocurrencies and equity markets show remarkable signs of maturity. The methodology used by the researchers was collective dynamics through which they recognized the mathematical properties. With this, they used “hierarchical clustering” which is a method of measuring the interaction between groups of data underlying both cryptocurrencies and equities.
The authors of the study also stated that there is evidence for evaluating and finding the existence of the best value of cryptocurrencies. As the research quoted “Retail investors with limited ability to hold complex portfolios of many cryptocurrencies may be sufficiently diversified with a relatively small portfolio across just 16 cryptocurrencies.”
Though the research established a nascent relationship between the two it also mentioned the underlying and inherent issues with the contemporary crypto ecosystem. As mentioned the major issue with cryptocurrencies in the contemporary scenario is the lack of inherent and intrinsic value and price volatility. Apart from this, there is a lack of clarity and gaps in regulation and legislation, a lack of transparency and a threat to the sovereignty of a nation.
To establish a new economic and financial system across the globe, regulation and legislation are very important in the sphere of cryptocurrencies. It is important to note that the new law passed by the European Union can act as a blueprint for every country to draft laws for cryptocurrencies and digital assets.
