The economics of BitCoin price formation

Pavel Ciaian, Miroslava Rajcaniova and d'Artis Kancs

Applied Economics, 2016, vol. 48, issue 19, 1799-1815

Abstract: This is the first article that studies BitCoin price formation by considering both the traditional determinants of currency price, e.g., market forces of supply and demand, and digital currencies specific factors, e.g., BitCoin attractiveness for investors and users. The conceptual framework is based on the Barro (1979) model, from which we derive testable hypotheses. Using daily data for five years (2009--2015) and applying time-series analytical mechanisms, we find that market forces and BitCoin attractiveness for investors and users have a significant impact on BitCoin price but with variation over time. Our estimates do not support previous findings that macro-financial developments are driving BitCoin price in the long run.

Date: 2016
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Working Paper: The Economics of BitCoin Price Formation (2014)
Working Paper: The Economics of BitCoin Price Formation (2014)
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DOI: 10.1080/00036846.2015.1109038

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