Competition in the Cryptocurrency Market

Neil Gandal and Hanna Halaburda

No 10157, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We analyze how network effects affect competition in the nascent cryptocurrency market. We do so by examining the changes over time in exchange rate data among cryptocurrencies. Specifically, we look at two aspects: (1) competition among different currencies, and (2) competition among exchanges where those currencies are traded. Our data suggest that the winner-take-all effect is dominant early in the market. During this period, when Bitcoin becomes more valuable against the U.S. dollar, it also becomes more valuable against other cryptocurrencies. This trend is reversed in the later period. The data in the later period are consistent with the use of cryptocurrencies as financial assets (popularized by Bitcoin), and not consistent with "winner-take-all" dynamics.

Keywords: Bitcoin; Cryptocurrency; Network effects (search for similar items in EconPapers)
JEL-codes: L17 L86 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-com, nep-ict, nep-ind and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (57)

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Related works:
Working Paper: Competition in the Cryptocurrency Market (2014)
Working Paper: Competition in the Cryptocurrency Market (2014)
Working Paper: Competition in the Cryptocurrency Market (2014)
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