The drivers of Bitcoin demand: A short and long-run analysis

Luis P. de la Horra, Gabriel de la Fuente and Javier Perote

International Review of Financial Analysis, 2019, vol. 62, issue C, 21-34

Abstract: Since 2010, Bitcoin has shown high price volatility, spurring a debate regarding the underlying reasons that lead economic agents to demand it. This paper analyzes the demand for Bitcoin in order to determine whether it stems from Bitcoin's utility as a medium of exchange, a speculative asset, or as a safe-haven commodity. We examine Bitcoin from a monetary-theory perspective and build a demand model that explores both the long-term and short-term relationships among variables. Our findings show that Bitcoin behaves as a speculative asset in the short term. In the long term, however, speculation does not seem to influence demand for Bitcoin. Instead, demand might be driven by expectations regarding Bitcoin's future utility as a medium of exchange.

Keywords: Bitcoin demand; Medium of exchange; Speculative asset; Safe haven; Bitcoin standard (search for similar items in EconPapers)
JEL-codes: C51 E41 E42 E50 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (38)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:62:y:2019:i:c:p:21-34

DOI: 10.1016/j.irfa.2019.01.006

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