Cryptocurrencies: Investigation of relationship between bitcoin, foreign exchange rates and alternative cryptocurrencies

Bitcoin has been mentioned for the first time in 2008 on article that published by a person or group using the pseudonymity Satashi Nakamoto. Bitcoin, the most well known and admitted cryptocurrency has drawn attention of whole sector with oscillation in a short span of time. As a new invention, cryptocurrency has become an enigma and it has been compared to lots of instruments especially fiat money and commodity. In this study, variety of economical procedure was used in order to analize the long term correlation and causality relationship between Bitcoin, the high liquidity of fiat money: euro, Swiss franc, British pound, Chinese yuan, Japanese yen and alternative cryptocurrencies: Litecoin, Etherum, Ripple. Because the 1 difference of all time series in the analysis is stationary so series are integrated on 1st order. Thus Johansen Cointegration Test has been found appropriate to apply to the series which are cordinally stable. 1 cointegrated vector was found between the series. Thus long term relationship was determined. This long term relationship was examined via Error Correction Model. The error correction coefficient was determined meaningless and positive (0,001770) so this situation was considered as the deviation from long term equilibrium could not be compensated in a short time. It was aimed to investigate the causality relationship with Granger Causality Test at the last step. As a result of this study, 1 way causality relationship from Bitcoin to Ripple was determined.