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What Determines Bitcoin’s Value?

Jamal Bouoiyour, Refk Selmi, Aviral Tiwari and Olaolu Olayeni

Working Papers from HAL

Abstract: Despite its great popularity and gradual worldwide acceptance, most people are still confused as to what a Bitcoin actually is. This paper tries to reach clearer knowledge about what determines the Bitcoin's value. . Due to the intrinsic complexity of crypto market, standard approaches often fail to capture the non-stationary and nonlinear properties and properly depict the moving tendencies. This problem can be solved by an objective data analysis method, i.e. Empirical Mode Decomposition. By decomposing Bitcoin price into intrinsic modes based on scale separation, we will be able to explain its generation from a novel perspective. Specifically, the intrinsic modes are composed into a fluctuating process, a slowly varying part and a trend. By doing so, the short-term fluctuations appear the major contributor of this new crypto-currency, without overlooking the power of long term trend. The first outcome suggests that Bitcoin is backed up by nothing other than the expectation of people' willingness to accept it and thus displays characteristics of purely speculative bubble. The second one implies that if traders appreciate risky investments, a trend can be identified and serious disappointments may await the unwary Bitcoiners.

Keywords: Crypto market; Bitcoin price; Empirical mode decomposition (search for similar items in EconPapers)
Date: 2015-05
New Economics Papers: this item is included in nep-fmk, nep-hme and nep-pay
Note: View the original document on HAL open archive server: https://univ-pau.hal.science/hal-01880330
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