The bitcoin: a sparkling bubble or price discovery?

Imad A. Moosa ()
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Imad A. Moosa: RMIT

Economia e Politica Industriale: Journal of Industrial and Business Economics, 2020, vol. 47, issue 1, No 4, 93-113

Abstract: Abstract The phenomenal rise in the price of bitcoin, prior to the trend reversal of early 2018, resembles a bubble as spectacular as any other bubble. A mere observation of the price rise and a comparison with the common characteristics of a bubble provide anecdotal evidence for the bitcoin bubble. Based on price and volume data up to the end of November 2017, formal empirical evidence is presented by using procedures that do not require the estimation of a fundamental value for bitcoin. The empirical evidence shows that (i) the volume of trading can be explained predominantly in terms of price dynamics; (ii) trading in bitcoin is based exclusively on technical considerations pertaining to past price movements, particularly positive price changes; and (iii) the price of bitcoin is an explosive process. These findings are interpreted to imply a price bubble.

Keywords: Bitcoin; Cryptocurrencies; Bubbles price discovery; Fundamental value (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s40812-019-00135-9

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