Financial Modelling of Cryptocurrency Price Dynamics

Abstract

The swift growth of cryptocurrencies in the global financial landscape has brought forth both significant opportunities and challenges. In this paper, a differential-equation model for cryptocurrency market dynamics based on the interaction of price, supply, demand, and mining hash rate is developed. The model captures the progression of these variables over time and is evaluated through numerical simulations by means of three illustrative settings. The outcomes provide insights into how different initial conditions influence cryptocurrency market behaviour and demonstrate the potential of the model for analysing price dynamics. The proposed framework provides a foundation for further research on the mathematical modelling and analysis of cryptocurrency markets.