Does the hashrate affect the bitcoin price?

Dean Fantazzini and Nikita Kolodin

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the relationship between the bitcoin price and the hashrate by disentangling the effects of the energy efficiency of the bitcoin mining equipment, bitcoin halving, and of structural breaks on the price dynamics. For this purpose, we propose a methodology based on exponential smoothing to model the dynamics of the Bitcoin network energy efficiency. We consider either directly the hashrate or the bitcoin cost-of-production model (CPM) as a proxy for the hashrate, to take any nonlinearity into account. In the first examined sub-sample (01/08/2016-04/12/2017), the hashrate and the CPMs were never significant, while a significant cointegration relationship was found in the second sub-sample (11/12/2017-24/02/2020). The empirical evidence shows that it is better to consider the hashrate directly rather than its proxy represented by the CPM when modeling its relationship with the bitcoin price. Moreover, the causality is always uni-directional going from the bitcoin price to the hashrate (or its proxies), with lags ranging from 1 week up to 6 weeks later. These findings are consistent with a large literature in energy economics, which showed that oil and gas returns affect the purchase of the drilling rigs with a delay of up to 3 months, whereas the impact of changes in the rig count on oil and gas returns is limited or not significant.

Keywords: Bitcoin; energy e�ciency; mining; hashrate; bitcoin price (search for similar items in EconPapers)
JEL-codes: C22 C32 C51 C53 E41 E42 E47 E51 G17 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-ene and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Journal Article: Does the Hashrate Affect the Bitcoin Price? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:103812

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