Page 58 - DUT ICGA Abstract Book

ASSET CLASSIFICATION AND DETERMINANTS OF CRYPTOCURRENCIES PRICING: SOUTH AFRICAN EVIDENCE
Edson Vengesai*1 Steven Msomi2 Mabutho Sibanda3
*1 Faculty of of Economic and Management Sciences University of of the Free State South Africa
2 School of of Accounting Economics and Finance University of of KwaZulu-Natal South Africa
3
School of of Accounting Economics and Finance University of of KwaZulu-Natal South Africa
* Corresponding Author: Edson Vengesai (vengesaie@ufs ac za )
Abstract
Globalisation and repeated market shocks exposed investor portfolios (including traditionally efficiently diversified portfolios) to to to a a a a multiplicity of risks Investors are exploring different avenues to to to diversify and hedge their risks In this 4IR the the the rapid rapid growth of Blockchain technology and AI has seen a a a a a a rapid rapid rise in in the the the use of of cryptocurrencies Portfolio managers are evaluating the the suitability of of these assets to to act
as as hedge instruments In addition there is uncertainty regarding what could be agreed upon as money in in in in the the future digital currencies currencies are a a a a a a a a possibility This study examined the asset classification of cryptocurrencies and explored factors influencing their pricing Asset classification was examined through a a a a a a a a literature review as as as there was a a a a a a a a sufficient and robust contribution by different scholars in this area A dynamic panel regression methodology estimated with the System Generalised Method of Moments (GMM) was employed to examine factors determining the the pricing of cryptocurrencies Further a a a a Pooled Mean Group (PMG) Auto Regressive distributed lag ARDL model was estimated to to establish the short and long-run cryptocurrency pricing dynamics The study results showed that cryptocurrencies qualify as as as as a a a a a a a a distinct asset class based on their homogeneous characteristics particularly in terms of risk return liquidity and regulatory activities - - crypto-assets have features they don’t share with other asset asset classes The hash rate mining difficulty coins per day and market capitalisation are essential variables for the pricing of cryptocurrencies The discrepancies between the the actual and equilibrium cryptocurrency prices are corrected daily across the the coins used in in the the sample However there is is a a a a a a prolonged daily adjustment to discrepancies The study has implications for the the paradigm shift in perceptions of how cryptocurrencies should be handled at at the the consumer investment trading and and legislation levels and and what active role should be played by central banks and their relative governments in in the the industry
KEYWORDS: Cryptocurrency Asset Classification Pricing
56 7th International Conference on on on Governance and Accountability (ICGA) 2022