What Factors Give Cryptocurrencies Their Value: An Empirical Analysis

Adam Hayes ()
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Adam Hayes: Department of Economics, New School for Social Research

No 1406, Working Papers from New School for Social Research, Department of Economics

Abstract: This paper aims to identify the likely source(s) of value that cryptocurrencies exhibit in the marketplace using cross sectional empirical data examining 66 of the most used such 'coins'. A regression model was estimated that points to three main drivers of cryptocurrency value: the aggregate computational power employed in mining for units of the cryptocurrency; the rate of unit production; and the cryptologic algorithm used for the protocol. Bitcoin-denominated relative prices were used, avoiding much of the price volatility associated with the dollar price of Bitcoin. The resulting model can be used so better understand the drivers of value observed in cryptocurrencies. These findings may also have implications in understanding other assets such as commodity forms of money.

Keywords: Bitcoin; cryptocurrencies; altcoins; asset pricing; money; payment systems; currency exchanges; quantitative analysis (search for similar items in EconPapers)
JEL-codes: C3 C51 E42 E47 G12 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2014-12, Revised 2015-03
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (8)

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http://www.economicpolicyresearch.org/econ/2014/NSSR_WP_062014.pdf First version, 2014 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:new:wpaper:1406

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