Crypto Assets Indicators and their Effect on the Market Capitalization: A Panel Data Analysis
Background: In this paper, four-years (21st October, 2018 – 21st October, 2022) cryptocurrencies indicators such as OPP, CPP, HGP, LOP, and ATV for six (6) crypto assets with high market capitalization based on coin categorization/utilization were considered as explanatory (independent) variables to estimate crypto assets returns. Aim: This study seek to evaluate the relationship between crypto asset indicators and crypto market capitalization, so as to quantitatively review and establish that crypto market capitalization can easily be influenced by crypto indicators. Method: The study uses three-panel data models, the pooled OLS, fixed effect (FE) and random effect (RE) changes, to evaluate crypto assets returns for the cross-sectional data of these six crypto assets. Results: The study revealed that all three-panel models fit the data; the result also shows that FE and RE models explain about 62% and 50%, respectively of the return variance on the total market capitalization (MCap). While, Pooled OLS model could only explain 42% variation on the total market capitalization (MCap). The Hausman test result indicates that the FE model is an appropriate model to estimate the cross-sectional variables when compared to the RE model. Also, the Lagrange Multiplier (LM) test statistic with corresponding p-value for FE and RE when compared to the pooled OLS are 32.117 (0.0000*) and 38.943 (0.0000*), respectively, indicating that both the FE and RE models are more appropriate than the Pooled OLS model when compared with each. The identified crypto indices employed are significant and positively affects the market capitalization of these crypto assets. Finally, the study reveals that crypto assets can be classified and considered as economic assets since they include monetary values and investors derive economic benefits in terms of holding gain/losses and other benefits.
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