To Mine or To Trade? An Investigation on the Sustainability of Blockchain Development and Cryptocurrency Market

Jiding Zhang, Operations, Information, and Decisions, The Wharton School; and Bowen Lou, University of Connecticut; and Chen Jin, National University of Singapore

Abstract: The cryptocurrency market has grown rapidly in recent years and become a popular innovative platform for the purpose of investment. Its underpinning blockchain infrastructure has been designed to keep track of trusted financial transactions. However, the behavioral pattern and business impact of investors involved in this burgeoning innovative market has not been paid much attention and less well understood. The market has undergone a series of ups and downs in the last couple of years. The investors need to react in an effective way in confrontation of this volatile financial market that is reliant on the underlying technological innovation in blockchain development. In this project, we examine how investors can make optimal investment decisions to maximize their benefits, while undertaking substantial risks from the volatility of the market. In order to have a better understanding of investor behavior, we categorize investors into traders, who primarily exchange cryptocurrencies for other traditional or virtual currencies, and miners, who leverage computing machines to verify the authenticity of information for cryptocurrency transaction each time it is created in the blockchain. Our study seeks to understand the behavioral pattern, strategy and impact of players in the financial market that is primarily empowered by the technological innovation.