The Impact of Cryptocurrency on the Investment Market

SHAKHNOS GAPURBAEVA

International University of Kyrgyzstan, Bishkek

17A/1, L. Tolstoy Street, Bishkek, 720007

KYRGYZSTAN

AZYK OROZONOVA

Kyrgyz National University named after Jusup Balasagyn Bishkek

LIUDMYLA HULIAIEVA

Academy of labour, social relations, and tourism

3-А, Kiltseva doroga, Kyiv, 08131

affect the correlation of these variables. The issue of cryptocurrency by banking institutions also ensures its

stability, thus expanding the investment potential of this financial instrument. The above contributes to the

formation of the cryptocurrency investment market in the structure of the stock market.The development of

cryptocurrencies of banking institutions operating in the online environment, provides the purchase and sale of

cryptocurrencies on stock exchanges, and not on crypto exchanges, allowing the use of cryptocurrencies as a

means of payment and investment. Among the factors that indicate the negative impact of cryptocurrency on

the investment market are the following: the lack of a stable value of cryptocurrency and its volatility,

dependence on fluctuations in the world economy and macroeconomic factors, in particular demand; as a result

of the first factor, cryptocurrency as an object of investment activity is quite risky. Further research should be

devoted to the issues of central bank digital currencies and their potential impact on competition in the market

1 Introduction

After the impressive growth dynamics of the

cryptocurrency market in 2018-2021, there was a

decline in 2022. The growth factors were associated

with the rapidly growing public interest, which led

to an increase in demand in the market. Analysis of

assets lost about 80-90% of their value, which led to

a decline in investment activity. On November 11,

2022, one of the world's largest crypto exchanges

FTX declared bankruptcy due to a liquidity crisis

and began bankruptcy proceedings under American

law. At the beginning of 2022, FTX was valued at

$32 billion, but at the time of writing, funds are

writing off investments in this crypto exchange. The

CEO of the Binance crypto exchange points to the

beginning of the crisis in the cryptocurrency

based on the analysis of key environmental factors

that affect the correlation of these variables.

2 Problem Formulation

In the scientific literature, the area of cryptocurrency

impact on the investment market is little studied. At

the same time, a number of studies examine the

impact of cryptocurrency on the economy. Among

scientists and financial analysts, there is no

consensus on the ways in which cryptocurrencies

structure, in particular due to the emergence of new

digital currencies (for штіефтсу, the development of

projects to launch central bank digital currencies

(CBDC), private companies that actively compete

with each other; they issue their own digital

currencies, understanding the significant potential).

There is an expansion of access to the investment

market due to the ability of various economic agents

to purchase crypto assets, which is due to the

dynamic development of financial and technological

Whereas Lytvynenko and Sytnikov [1] concluded

Makovoz and Perederii [4] in the context of

economic relations note that cryptocurrency can be

both an investment and an object of investment

activity. At the same time, among the advantages of

investment, the authors highlight the speed, ease and

anonymity of investment, the growth of profitability

of such investments, and among the disadvantages -

the imperfection of legal regulation of these

relations. In the context of the latter, it is worth

noting that central banks (CB) of different countries

the investment environment and the connection of

cryptocurrencies with it, highlights that the

consequences of the impact of cryptocurrencies on

the development of the global financial system

remain unknown.

It is worth noting that in the scientific literature, the

analysis of the impact of cryptocurrency on the

investment market is based on the assessment of a

limited number of indicators that study such impact

(for example, only market dynamics or

capitalization). The studies also rely on the opinions

of international experts, without generally taking

and technological companies and their technological

solutions for cryptocurrencies, in particular

neobanks (virtual banks that ensure the growth of

online banking) and the development of the

regulatory framework for the regulation of digital

currencies, in particular by central banks. That is

why in the scientific discussion there is no single

point of view regarding such impact, and the most

common opinions are as follows 1) the

cryptocurrency market is a new financial pyramid, a

and develop as a new digital payment instrument.

In view of the above, it is advisable to analyze the

impact of cryptocurrency on the investment market,

taking into account these positive factors on the

development of both digital money and the growth

of investment in them. These factors together with

supply, demand, price and level of competition in

the cryptocurrency market change the structure of

the investment market.

As a matter of fact, cryptocurrencies are a

technological means of payment, an intellectual

asset, thus they can be attributed to intellectual

intangible assets that are the object of investment,

the value of which is currently estimated in dollars.

Therefore, it is possible to distinguish the

cryptocurrency investment market as part of the

investment market and at the same time to argue

that cryptocurrencies are a new digital means of

payment.

The influence of cryptocurrency on the investment

market will grow due to a number of factors. Key

Denmark (95%) and Iceland (95%). Internet

banking is becoming one of the most popular

payment methods in Europe, allowing customers of

a bank or other financial institution to carry out a

wide range of financial transactions through their

websites. Accordingly, the level of trust of

Europeans to this electronic payment system is

growing. In some countries, such as Germany or

Austria, the use of physical cash is significantly

reduced [5]. The growth of trust in electronic

riskiness of this type of digital money. It can be

expected that the issue of cryptocurrencies by online

banks will ensure the stability of their value. The

lack of stability of the cryptocurrency is evidenced

by the data in Table 1.

Table 1. Price, price change, market capitalization volume and supply of ten cryptocurrencies as of 11.11.2022

have been rapidly gaining popularity among the

population due to the simplification of banking

services. The latter also applies to a quick, easy way

to purchase cryptocurrency, investing in

cryptocurrency. Among the examples is the Swiss

neobank Dukascopy Bank, located in Geneva,

regulated by the Swiss Financial Market

Supervisory Authority FINMA as a bank and

securities company. As of 31 December 2020,

Dukascopy Bank is a fully digital Swiss bank and

modern environment12. Since 2016, an account in

Dukascopy can be opened in one day and fully

online, which allowed the bank to open 303,728

accounts as of November 11, 2022 [7]. The Group

offers multi-product (FX, bullion, CFD, binary

options) online and mobile trading platforms, a wide

range of other financial services, including current

accounts, guarantees, classic bank payments,

innovative instant payments via smartphones,

payment cards. Among the products of Dukascopy

strictly regulated bank to be accepted by the Bank

for payment and funding in euros [7]. The bank

considers Dukascoins to be a successful project and

product, given its wide acceptance as a reward for

customers who open an MCA multi-currency

account. The Dukascopy brand is known worldwide

for innovation and integrity in digital financial

services12. The main strategic directions of the

bank’s development remain focused on mobile retail

banking and cryptocurrency related activities. In

2021, the development and growth of Dukascoin

took place: by the end of 2021, more than 5 million

October 2022 was 1.4 euros, the minimum value

was 0.63 euros, and the maximum value was 3.42

euros in December 2020 [7].

It was the online/digital banking model of

Dukascopy Bank, introduced in 2017, that

contributed to the flexibility of operations, the rapid

adoption of blockchain technology and the launch of

its specific financial programs for the development

of cryptocurrency. It is worth noting that the bank

offers customers around the world to open a multi-

manager, investments in gold, silver, oil, gas,

stocks, many indices and cryptocurrencies, etc. [8]

Thus, Dukascopy Bank allows customers of

different segments to purchase their own

cryptocurrency and use it for both payments and

investments.

Thus, we can agree that cryptocurrency has a huge

investment potential, opening up opportunities for

different groups of investors2. At the moment,

cryptocurrency has already significantly changed

Among the factors of the development of

cryptocurrency as a new financial instrument for

settlement and investment is the development of the

digital economy, which has led to the transformation

of the regulatory environment, the awareness of

central banks of the need to launch digital

currencies. This awareness is a response of central

banks to the high competition from financial

technology companies and the opposition of their

financial technology services to traditional banks.

CBs have realized the potential of blockchain

technology and how it can be used to create a new

understands the needs of customers for a simple,

fast, round-the-clock accessible service for financial

transactions. This, in turn, stimulates the

introduction of new services, digitalization and

transformation into financial technology companies.

The latter, in order to ensure the sustainability of

their own positions in the market, are developing

private cryptocurrencies that are convenient and

easy to use, both as a means of payment and as a

means of investment, as demonstrated by the

to create a digital currency platform based on

aspects of its own interbank payment system SPEI

in a report it published on December 17, 2021 on its

website. The report, however, does not set a launch

date for the currency, only specifying the possibility

of using it by the population without bank accounts

[8].

According to the Atlantic Union [9], as of

November 2022, 87 countries (representing more

than 90% of global GDP) are studying the

Eastern Caribbean Islands, Nigeria. Nigeria is the

latest country to launch a digital currency, eNaira,

the first outside the Caribbean. At the launch of the

eNaira in October 2021, the Governor of the Central

Bank of Nigeria, Godwin Emefiele, announced that

500 million e-Naira (US$1.21 million) had already

been minted. Currently, only bank account holders

can access the eNaira by registering with the

Nigerian bank ID BVN. The next phase of

implementation will include non-banking services

using Nigeria’s National Identification Number,

NIN, which has now reached 60 million

currency launch and are preparing for a possible full

launch. Without new standards and international

coordination, the financial system may face a

significant problem of digital currency

interoperability in the future [8].

The main reasons for central banks to launch digital

currencies have been outlined. Digital currencies are

more cost-effective than physical cash because they

have lower transaction costs. Moreover, digital

currencies can promote financial inclusion, which

system can cause a negative reaction from users and

pose cybersecurity risks. To launch digital

currencies, regulatory processes for circulating the

new form of money must be updated and

harmonized. In addition, digital currencies must be

reliable to use and inspire the trust of citizens.

It is also worth citing an example of the positive

indirect impact of cryptocurrency on the investment

market in the context of cross-border cooperation

and facilitation of transactions between countries.

could successfully facilitate cross-border

transactions. In February 2021, the United Arab

Emirates joined China, Hong Kong and Thailand in

a joint cross-border digital currency trial10.

The conducted study of the impact of

cryptocurrencies on the investment market allows us

to identify a number of factors that indicate a

positive impact: the development of financial

cryptocurrencies of banking institutions operating in

the online environment, provides the purchase and

sale of cryptocurrencies on stock exchanges, and not

on crypto exchanges, allowing the use of

cryptocurrencies as a means of payment and

investment. The issue of cryptocurrency by banking

institutions also ensures its stability, thus expanding

the investment potential of this financial instrument.

The above contributes to the formation of the

cryptocurrency investment market in the structure of

impact of cryptocurrency on the world

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[2] Kavetskyi, V. (2019). Influence of the

cryptocurrency market on financial trends of

our time. Socio-Economic Relations in the

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https://doi.org/10.18371/2221-

[4] Makovoz, O. S., Perederii, T. S (2017).

Capitalization of investments in

cryptocurrencies. 2017.

[5] Statista (2021). Online banking penetration in

selected European markets in 2021. Available

at:

https://www.statista.com/statistics/222286/onli

ne-banking-penetration-in-leading-european-

countries/

[6] Coin Market Capitalization. Today's

%20Annual%20Report%20for%202021.pdf

[8] Overview of the activities of the company and

Dukascopy Bank Group, Available at:

https://www.dukascopy.com/swiss/russian/abo

ut/company/

[9] Atlantic Council. Central Bank Digital

Currency Tracker, available at:

https://www.atlanticcouncil.org/cbdctracker/

[10] Duchenko, M. M., Pavlenko, T. V. (2018). The

impact of cryptocurrencies on the country's

[13] Dukascopy Bank (2021). Annual repor,

Available at:

https://www.dukascopy.com/media/pdf/Dukasc

opy%20Bank%20SA%20-

%20Annual%20Report%20for%202021.pdf

[14] FTX Group filed for bankruptcy (2023).

Available at: https://forklog.com/news/ftx-

group-podala-zayavlenie-o-bankrotstve-sem-

benkman-frid-ushel-v-

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1-12-30/mexico-s-central-bank-will-launch-its-

digital-currency-by-2024

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Creative Commons Attribution License 4.0

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Sources of Funding for Research Presented in a

Scientific Article or Scientific Article Itself

No funding was received for conducting this study.

Conflict of Interest

Creative Commons Attribution License 4.0

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