Cryptocurrencies in Moderm Economy

The thesis on the topic “Cryptocurrencies in the modern economy” is aimed at analyzing the current state and dynamic processes of the cryptocurrency market to identify signs of financial bubbles. With the rapid progress of the digital economy and innovative developments, cryptocurrencies have gained significant importance in the financial sector since the creation of Bitcoin in 2009. This study highlights the importance of studying cryptocurrencies in the context of their impact on global payment systems and economic structures. The objective of the study is to comprehensively assess the cryptocurrency market using modern econometric techniques, including SADF, GSADF and OLS-CUSUM, to identify signs of financial bubbles. The cryptocurrencies Bitcoin, Ethereum, Ripple and the lesser-known Pepecoin were selected as objects of research. Methodological approach The study is based on time series of cryptocurrency values, analyzed using a series of econometric tests. SADF (Supreme Augmented Dickey-Fuller Expansion Test): This tool identifies periods of abnormal price behavior that may indicate the presence of a financial bubble. GSADF (Generalized SADF Test): An extended version of the previous test, capable of identifying multiple bubbles in a time series. OLS-CUSUM (Ordinary Least Squares Cumulative Sum): The test is used to detect structural breaks that may be an indicator of a financial bubble collapse. Research results Bitcoin and Ethereum: Using the GSADF and OLS-CUSUM methods, no signs of financial bubbles were found at the 95% confidence interval level, which confirms the stability of these cryptocurrencies within the analyzed period. Ripple and Pepecoin: Identified indicators of financial bubbles at certain stages of the timeline. In particular, data on Pepecoin indicates the potential speculative nature of this cryptocurrency. The analysis also showed that in the first sub-period of the study from November 9, 2017 to June 11, 2020, with the exception of Bitcoin, all the cryptocurrencies studied showed signs of bubble dynamics, while in the second sub-period such phenomena were found only for Pepecoin. conclusions This work confirms the existence of attributes of financial bubbles in the cryptocurrency sector, especially among less popular assets such as Pepecoin. At the same time, the analysis of the key cryptocurrencies - Bitcoin and Ethereum - indicates their relative stability, despite the overall high volatility of the market. Practical significance The use of GSADF and OLS-CUSUM tests contributes to a more in-depth analysis of the market situation and justification of investment strategies. The methodology we propose can be adapted for independent analysis of other cryptocurrencies, which will help investors make informed decisions regarding less popular and new digital assets. Conclusion The analysis made makes a significant contribution to understanding the trends and stability of the cryptocurrency market. The study demonstrates that most cryptocurrency assets are stable, while lesser-known ones can pose significant risks associated with financial bubbles. This work highlights the importance of critical thinking and asset selection for investment in a highly dynamic and volatile cryptocurrency market.