Entropy analysis of the information environment as a tool for financial diagnostic assessment of cryptocurrency market volatility

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Abstract

the article examines the impact of news anomalies on cryptocurrency market volatility using entropy analysis of the information environment and the ARIMA model. The methodological approach combines the calculation of entropy indicators of the news flow and their comparison with ARIMA forecast errors, which allows for a quantitative assessment of the relationship between information shocks and abnormal price movements. It is shown that an increase in the entropy of the news background is a harbinger of instability and can serve as an indicator of increased risk. The results of testing on data on the dynamics of Bitcoin confirm the applicability of the proposed toolkit for diagnosing and forecasting market instability. The work contributes to the development of financial analysis methods by proposing the integration of the entropy approach into risk management systems. Prospects for further research include expanding the set of information background sources and optimising model parameters. The work was carried out within the framework of the project «Development of a methodology for the formation of an instrumental base for analysis and modeling of spatial socio-economic development of systems in the context of digitalization based on internal reserves» (FSEG- 2023-0008).

About the authors

P. A Yacob

Peter the Great St. Petersburg Polytechnic University

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