Content area
Cryptocurrencies, powered by blockchain technology, have disrupted traditional notions of currency, finance, and transactional systems. Bitcoin, the pioneering cryptocurrency launched in 2009, paved the way for a myriad of alternative cryptocurrencies, each with unique features and use cases. Ethereum, for instance, introduced smart contracts, which enable programmable and self-executing agreements on its blockchain. They have not only introduced a novel avenue for investment that facilitates continuous trading around the clock globally, but they have also forged a unique economic landscape marked by the absence of a central authority controlling the currency. This departure from the conventional norms of the traditional financial system presents both an innovative opportunity and a distinctive challenge for participants in this evolving financial ecosystem. As cryptocurrencies are getting more popular, their impact on global economies and financial institutions becomes more pronounced. This surge, coupled with the apparent absence of fundamental value in cryptocurrencies and their overall high volatility, has ignited discussions among scholars, regulators, and individual participants regarding their viability as an alternative investment. US and European Union have already taken steps towards regulating cryptocurrencies to support the market integrity and financial stability of cryptocurrencies (Browne and Sigalos, 2024; ESMA, 2023). Moreover, the resource-intensive process of mining, used to validate transactions in certain cryptocurrencies such as Bitcoin, which is still the dominant player in the market, has resulted in debates about the sustainability of these cryptocurrencies.
Therefore, this dissertation seeks to contribute to the ongoing discussion about cryptocurrencies by providing a comprehensive examination of their various facets related to investment. In doing so, it bolsters the scientific foundation necessary for not only making informed investment decisions, but also making informed policy decisions and thereby advancing the crucial task of improving regulation. Although cryptocurrency is a relatively new topic, there is already a variety of research streams in this field, as illustrated in this thesis. The first two chapters investigate cryptocurrencies from the point of view of asset pricing, where we attempt to find which design features of cryptocurrencies are relevant for their market capitalization and return volatility. Chapter 3 focuses on one of the design features introduced in Chapter 1 and 2: the consensus mechanism used for transaction validation within the cryptocurrency network. In particular, we investigate the centralization of cryptocurrencies through an event study. This paper is in the field of economic implications arising from blockchain, similar to what was done by Lehar and Parlour (2022). Chapter 4 is in the field of behavioral finance with a more temporal focus, where we investigate intraday investor herding behavior. With many retail investors, herding is particularly relevant for cryptocurrency as an alternative investment and potential store of value. These topics are relevant not only for cryptocurrency investors, but also for regulators and cryptocurrency developers. Table 1 provides an overview of the four chapters by outlining the respective research question, sample periods and data sources, and the key methodologies involved. Subsequent paragraphs give a more detailed summary of each of the chapters.
This table provides an overview of the four chapters of this dissertation. Research Question broadly summarizes the questions addressed. Period describes the sample period. Data Sources lists the primary data sources used in the chapter (though additional data sources might be used as indicated in the respective chapters). Methodologies lists the main econometric tools used to analyze the data.