Abstract:

In the highly volatile crypto market, which has attracted attention with its risks and returns in recent years, the interaction of cryptocurrencies with each other has been an important element for investors' portfolio decisions. Cryptocurrencies have been seen as a diversification tool in the investment portfolio or as a hedge against alternative investments. In this article, nonlinear dynamic relationships between cryptocurrencies are investigated using 231 observations including weekly closing prices of Bitcoin, Binance, Cardano, Dogecoin, Ripple, Ethereum and IOTA currencies. For this purpose, nonlinear long-term relationships and causal relationships between cryptos were questioned. It has been determined that most cryptocurrencies have a high and positive correlation with each other. Econometric findings indicate that there is a long-term relationship between Bitcoin and Ethereum and a mutual interaction between Bitcoin and other currencies. The findings imply that during periods of high volatility in the cryptocurrency market, investors may have difficulty hedging among cryptocurrencies. In other words, it is another finding of this study that the benefit of the diversification effort within the crypto money market will be limited to investors.

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