Mining Shocks, Blockchain Security, and the Value of Bitcoin

Karau, Sören and Emanuel Moench

No 20141, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the implications of Bitcoin's security model for its market valuation. We identify mining shocks by exploiting exogenous variation in mining intensity using a narrative approach in a structural Vector Autoregression. While their impact on transaction speed is short-lived, mining shocks persistently affect trading volumes and market valuations, explaining up to 15 percent of Bitcoin's substantial price variation. Our findings can be rationalized in a theoretical framework where mining shocks affect the likelihood to withstand potential attacks and as such impact investor beliefs about the future state of the network and thus Bitcoin’s usefulness as a means of payment.

Keywords: Bitcoin; Blockchain; Mining; Proxy var (search for similar items in EconPapers)
JEL-codes: E42 G32 L14 O16 (search for similar items in EconPapers)
Date: 2025-04
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