Financial Viability Of Cryptocurrencies In Pakistan

Abstract

The globally acknowledged growing crypto mania has put a lot of work on researchers. This new phenomenon of digital currencies requires a lot of attention, for it to become conventional worldwide. Virtual coins or cryptographic forms of money utilize encryption frameworks that manage the formation of coins and exchanges, must be recognized from a financial examination point of view. Subsequently, it is essential to inspect which social, money related & macroeconomic components decide its cost with a specific end goal to know the degree and outcomes of the economy. This study aims to study the effect of different internal and external factors that affect its price. A sample of four digital coins with largest market capitalization has been selected. Daily price data from the years 2015 to 2018 of Bitcoin with other altcoins such as Ethereum, ripple and Litecoin has been taken. Internal factors consist of demand and supply variables and also the attractiveness associated with its increasing hype. Other factors include KSE-100 Index (Karachi Stock Exchange), USD-PKR (Dollar to Pakistani Rupee) exchange rate and oil prices from PSO (Pakistan State Oil). Regression analysis has been done to study the causal effect of these factors on the prices of crypto coins. Our analysis shows that amongst all factors, supply has a significant effect on all crypto coins. Attractiveness and exchange rates also affect their prices. Keywords Cryptocurrency, Bitcoin, Altcoins, Attractiveness, Demand, Supply, Macroeconomic and financial developments, Price.