Dissertation committee:
Παναγιώτης Αλεξάκης, Καθηγητής, Τμήμα Διοίκησης Επιχειρήσεων και Οργανισμών, Εθνικό και Καποδιστριακό Πανεπιστήμιο Αθηνών
Ιωάννης Λεβεντίδης, Αναπληρωτής Καθηγητής, Τμήμα Οικονομικών Επιστημών, Εθνικό και Καποδιστριακό Πανεπιστήμιο Αθηνών
Γεώργιος Δοτσης, Επίκουρος Καθηγητής, Τμήμα Οικονομικών Επιστημών, Εθνικό και Καποδιστριακό Πανεπιστήμιο Αθηνών
Δημήτριος Βασιλείου, Καθηγητής, Τμήμα Οικονομικών Επιστημών, Εθνικό και Καποδιστριακό Πανεπιστήμιο Αθηνών
Στυλιανός Κώτσιος, Καθηγητής, Τμήμα Οικονομικών Επιστημών, Εθνικό και Καποδιστριακό Πανεπιστήμιο Αθηνών
Γεώργιος Χορταρέας, Καθηγητής, Τμήμα Οικονομικών Επιστημών, Εθνικό και Καποδιστριακό Πανεπιστήμιο Αθηνών
Δημήτριος Καινούργιος, Αναπληρωτής Καθηγητής, Τμήμα Οικονομικών Επιστημών, Εθνικό και Καποδιστριακό Πανεπιστήμιο Αθηνών
Summary:
This PhD thesis is motivated by the unprecedented monetary and financial nature of
cryptocurrencies issued and circulated in Distributed Ledgers for that it has not been
collectively studied. Distributed ledgers can be viewed as payment networks operating
without intermediary for exchanging wealth wherein two roles are assumed. More
specifically, that of clearing house (in settling transactions) and that of regulator (for
controlling the supply). Aside from the former service which is commonplace in money
issuance industry’s ordinary business of life, there is something unusual that stems from
the latter that is, the system itself creates its own num´eraire referred to as cryptocurrency.
Such alternative systems at least outwardly challenge and as though may supplant
the established today’s banking and finance paradigm which is traditionally associated
with (a) currencies (sovereign money) and (b) securities (either in the form of debt or
equity). Interestingly, the latter, so far, are only expressed in the unit of account of the
former. In the foreign exchange market, the supply of currencies is linked to the activities
of commercial banking which are monitored by national and international monetary
authorities. To that extent, cryptocurrencies can offer a wide variety of alternatives that
were not previously available to private entities and the general public when it comes to
designing investment assets, credit instruments and, of course, cash. Traditionally, these
have been provided by institutions such as centralized exchanges, accredited banks by a
central bank and the State.
The first two chapters broadly examine the relevance of the newly established Distributed
Ledgers ecosystems as well as the impact on the economic literature through
ages.
Chapter 1 first endeavors to collect and describe the varieties of Distributed Ledgers
spanned throughout the first ten years following the inception of Bitcoin, yet from a
critical perspective aiming to mark not only the dissimilarity with traditional monetary
and financial assets but also growth potential. This allows to better grasp the diversity
within the market as all cryptocurrencies are not alike rather are created to serve different
causes. Other pure financial (to fund a project in the form of a pre-payment), other
pure monetary (to reward benevolent economic behavior, settle transaction cheaper than
traditional banking systems or/and ensure stable purchasing power of a bundle of goods)
and other a combination of the two. Cryptocurrencies only live in distributed ledgers
and can be broadly distinguished between Algorithmic (if decentralized) and Token (if
centralized, thus IOU). As the cryptocurrency market matures in volume and number of
participants, we identified the need for a taxonomy able to classify the constant diffusion of wide-ranging cryptocurrencies into standard categorical asset classes on the basis of
the criteria of liability, convertibility of collateral and revenue recognition which we
embed. This is suited to formulate distinct accounting standards and tax policies of
Initial Coin and Token Offerings.
Chapter 2 contributes an all-encompassing survey of literature on this still uncharted
breed of research looming anew. A critical approach is employed in reviewing
all related works on blockchain and cryptocurrencies research through ages. The main
contribution is filling the evident shortage of a literature review able to collectively record
the chain of evolution of research on distributed ledgers, cryptocurrencies and blockchain.
The inherent scope is to point out that this new research field embraces economic literature
across all its main branches, thus not limited to financial economics in examining
a new (alternative) asset market. To do so, we further contribute by identifying the
four alternative perspectives that blockchain and cryptocurrencies blueprints have introduced
and in turn, effectively challenge industry and literature for that they deliver new
frameworks of (i) auctioneer (in clearing), (ii) organization (in governance), (iii) money
(in exchange) and (iv) capital (in raising financing) which have been traditionally linked
to the necessity of centralization.
The next two chapters probe into the monetary nature of cryptocurrencies. The
motivation is to show why and how cryptocurrencies could play a significant role as a
substitute to traditional banking.
Chapter 3 contributes a conceptual monetary analysis of cryptocurrencies. Our
approach differs from all previous attempts by introducing all kinds of cryptocurrencies
to the theory and practice of money and currency exchange rate arrangements. At the
beginning, we attempt to position cryptocurrencies in the theory and concepts of money
and banking. This work will have the effect of bringing cryptocurrencies as closely as
possible to the definitions and operations of central and commercial banking. By mastering
all varieties of cryptocurrencies (algorithmic, tokens, stablecoins) with respect to
their monetary foundations, we envisage how competition with traditional banking in
the money markets is likely to occur. Note that as monetary assets, cryptocurrencies are
closer to currency, thus cash items rather to bank checking accounts, thus cash equivalent
items for that the peer-to-peer (distributed) nature of the blockchain renders cryptocurrencies’
issuance irreversible. Though, cryptocurrencies look alike bank deposits for that
their electronic nature allow geographically distant trades as opposed to currency. We
conclude that (a) Token cryptocurrencies under quantity rules by meeting the deferred
payments function can introduce competition to commercial banking’s checking accounts
and pledged asset (short-term) lines of credit and (b) Stable cryptocurrencies by meeting the media of exchange function can introduce competition to commercial banking’s
deposits alike e-money issuance institutions. Finally, (c) Algorithmic cryptocurrencies
under quantity rules such as Bitcoin pertain investment nature whose intrinsic value
stems from the usage of these coins in the decentralized built-in blockchain. These may
be perceived as alternative commodities of digital nature chiefly demanded to store value.
Notably, traditional currencies are still of the greatest value and importance to the real
economy and surprisingly to cryptocurrency ecosystems as well for that they convey the
intelligence of the prevailing num´eraire. The absence of inside money, however, due to
lack of portfolio management activities impedes cryptocurrencies’ penetration into capital
markets where the banking sector continues to prevail. In addition, we demonstrate
the existing pluralism in cryptocurrency asset classes by showing all different trajectories
of supply and demand functions in these markets.
Chapter 4 focuses on Stablecoins. We set up a sample of 4 representative cryptocurrencies
corresponding to the main categorical cases of Stablecoins. This work contributes
fresh insights with respect to their diverse monetary structures which adhere to
fixed exchange rate regimes. We provide an empirical framework analogous to Impossible
Trinity for exploring monetary arrangements across Stablecoins wherein reserves
are held. While the hypothesis is supported for all cryptocurrencies in question, the
trade-off combination among exchange rate stability, capital openness and monetary independence
varies with the categorical types of Stablecoins. This uncovers the inherent
constraints of their monetary structures compared to the rest genres of cryptocurrencies.
This is the first work in this attempt for that the literature, so far, only focuses on
empirically investigating the presence of financial theories in cryptocurrencies.
The last two chapters delve into the financial nature of cryptocurrencies. The motivation
is to infer trading behavior by showing recent developments in investment practice
in constructing cryptocurrency portfolios while highlighting the role of grouping cryptocurrencies
into asset classes and indexes for comparing and forecasting performance
more evenly.
Chapter 5 introduces cryptocurrencies to investment theory and practice. We first
look at the different risk-return profiles of each asset class market leader and then construct
various mean-variance portfolios to only include cryptocurrencies or blend these
with traditional investment assets such as equities and currencies as well other such as
commodities using a dataset of 6 cryptocurrencies and 10 ths. observations. The results
are compatible with the literature highlighting the effect of reducing non-systemic risk.
Chapter 6 contributes empirical evidence of market efficiency of cryptocurrency
markets. We focus on examining trading behavior within and across cryptocurrency indexes which we set up. This work contributes to a growing literature which calls for
constructing crypto market indexes. The study of peer groups and indexes is important
for matching investors’ tastes and preferences. The motivation is to identify similarities
and differences in trading activity both across and within these composite indexes. We
build indexes of daily returns using market capitalization data but useful extensions
may include other variations. For assets, we use the daily change in prices (exchange
rates). We use daily data frequency of 57 cryptocurrencies throughout their entire
trading history corresponding to approximately 100 ths. observations, aiming to draw
inferences about the weak form efficiency hypothesis, yet conditional on the varieties
of crypto-asset classes (indexes). Against this background, we investigate stylized facts
traditionally found in daily returns, by employing tests for the presence of random walks,
white noise as well as tests for effects namely symmetric time-varying, risk premium,
leverage, calendar and regime switching. The results support the existence of switch of
states (high-low volatility, from negative to positive returns) while do not support the
existence of calendar effects on Monday. With regards to the market cap indexes, most
exhibit positive in-excess returns going towards the end of the week and especially on
Friday and during the Weekend. The less likely anomaly this study can support is the
existence of leverage effects.
