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On the Value of Virtual Currencies

Wilko Bolt () and Maarten van Oordt

Staff Working Papers from Bank of Canada

Abstract: This paper develops an economic framework to analyze the exchange rate of virtual currency. Three components are important: first, the current use of virtual currency to make payments; second, the decision of forward-looking investors to buy virtual currency (thereby effectively regulating its supply); and third, the elements that jointly drive future consumer adoption and merchant acceptance of virtual currency. The model predicts that, as virtual currency becomes more established, the exchange rate will become less sensitive to the impact of shocks to speculators’ beliefs. This undermines the notion that excessive exchange rate volatility will prohibit widespread use of virtual currency.

Keywords: Asset Pricing; E-Money; Exchange rates (search for similar items in EconPapers)
JEL-codes: E42 E51 F31 G1 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2016
New Economics Papers: this item is included in nep-mac, nep-mon and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24) Track citations by RSS feed

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Journal Article: On the Value of Virtual Currencies (2020) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:16-42

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