ANALYSIS OF GRANGER CAUSATION RELATIONSHIPS IN THE CRYPTOCURRENCY MARKET

Abstract

This study provides a comprehensive analysis of the internal dynamics within the cryptocurrency market by examining 401 cryptocurrencies traded on Binance from January 1, 2017, to May 31, 2024. Utilising Granger causality tests, we investigate the predictive relationships and interdependencies among these digital assets to understand the complex network of influences that characterise the cryptocurrency ecosystem. Our findings reveal a highly interconnected market where certain cryptocurrencies, notably Anchor Protocol, serve as leading indicators influencing the price movements of others. Platform tokens emerged as the most influential category, underscoring their central role in shaping market behaviour. The extensive bidirectional causality observed among the cryptocurrencies indicates mutual influences and intricate interdependencies, suggesting that shifts in one asset can rapidly propagate through the market. These insights contribute to a deeper economic understanding of market dynamics within the cryptocurrency space, highlighting the necessity for investors and policymakers to consider the unique characteristics and interdependencies of digital assets in their strategies and regulatory frameworks.