Disorder Unleashes Panic in Bitcoin Dynamics

TL;DR

This paper models Bitcoin Blockchain behavior as a spin-lattice system to uncover how disordered patterns can predict panic selling, revealing a link between human behavior, blockchain disorder, and market crashes.

Contribution

It introduces a novel spin-lattice model of Blockchain dynamics to detect causal links between blockchain disorder and market panic in Bitcoin.

Findings

Disordered Blockchain patterns precede panic selling in Bitcoin.

A causal relationship exists between Blockchain disorder and market trends.

The model reveals human behavior influences Bitcoin market volatility.

Abstract

The behaviour of Bitcoin owners is reflected in the structure and the number of bitcoin transactions encoded in the Blockchain. Likewise, the behaviour of Bitcoin traders is reflected in the formation of bullish and bearish trends in the crypto market. In light of these observations, we wonder if human behaviour underlies some relationship between the Blockchain and the crypto market. To address this question, we map the Blockchain to a spin-lattice problem, whose configurations form ordered and disordered patterns, representing the behaviour of Bitcoin owners. This novel approach allows us to obtain time series suitable to detect a causal relationship between the dynamics of the Blockchain and market trends of the Bitcoin and to find that disordered patterns in the Blockchain precede Bitcoin panic selling. Our results suggest that human behaviour underlying Blockchain evolution and the crypto market brings out a fascinating connection between disorder and panic in Bitcoin dynamics.