Volatility analysis for cryptocurrencies: An application for Bitcoin and Ethereum

Crypto money is a crucial comlementary of the system together with the phenomenon of globalization by succeeding in influencing the whole world within economic systems. At the same time, its share in financial markets has become a matter of curiosity for investors. It is known that people prefer Bitcoin, which is one type of the crypto moneys, because of the gradual expansion of the transaction volume in the markets. Therefore, it is extremely normal that researches about crypto money are being made. In addition to Bitcoin, it is observed that new crypto currencies are added to the markets every day. The reason why the concept of crypto money is so important is that it has an infrastructure called blockchain technology. With this design, the security of the system is maximized by using complex mathematical algorithms. Therefore, it has an extremely effective structure and is considered as the technology of the future. The purpose of this study is to contribute to the understanding of the volatility of cryptocurrencies. In this context, BTC and ETH which have high market value have been chosen to make return series and analyze the volatility based on the models mentioned under the theoroticcal section including; ARCH, GARCH, ARCH-M, GARCH-M, IGARCH, EGARCH, TGARCH, APARCH and ACGARCH. As a result of the analysis, it was found that the negative shocks in the BTC return series had a greater effect on volatility than the positive shocks. It has been concluded that positive shocks in ETH return series have more impact on volatility than negative shocks. For the data used in this study, it was seen that the asymmetric conditional variance models gave more significant results than the symmetric conditional variance models.