Bitcoin: Currency or Investment?

Baur, Dirk G.; Lee, Adrian D.; Hong, Ki-Hoon

doi:10.2139/ssrn.2561183

Cited by 61 publications

(46 citation statements)

References 25 publications

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“…Yet it is not clear whether Bitcoin is a currency or commodity or both (Lo & Wang, 2014). For Baur et al (2015) and Selgin (2015), Bitcoin is a hybrid between commodities (precious metals) and sovereign currencies. For Baur et al (2015) and Selgin (2015), Bitcoin is a hybrid between commodities (precious metals) and sovereign currencies.…”

Section: Literature Reviewmentioning

confidence: 99%

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Modelling long memory volatility in the Bitcoin market: Evidence of persistence and structural breaks

et al. 2018

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Motivated by the emergence of Bitcoin as a speculative financial investment, the purpose of this paper is to examine the persistence in the level and volatility of Bitcoin price, accounting for the impact of structural breaks. Using parametric and semiparametric techniques, we find strong evidence in favour of a permanency of the shocks and lack of mean reversion in the level series. We also reveal evidence of structural changes in the dynamics of Bitcoin. After accounting for the structural breaks in the level series, evidence of mean reversion is uncovered in some cases. Further analyses show evidence of a long memory in the two measures of volatility (absolute and the squared returns), whereas some cases of short memory are revealed in the squared returns series in particular. Practical implications are discussed on the inefficiency in the Bitcoin market and its importance for Bitcoin users and investors.

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Section: Literature Reviewmentioning

confidence: 99%

“…Baur et al (2015) and Brière, Oosterlinck, and Szafarz (2015) show that Bitcoin is uncorrelated with conventional assets and thus useful as a diversifier asset. Baur et al (2015) and Brière, Oosterlinck, and Szafarz (2015) show that Bitcoin is uncorrelated with conventional assets and thus useful as a diversifier asset.…”

Section: Literature Reviewmentioning

confidence: 99%

Modelling long memory volatility in the Bitcoin market: Evidence of persistence and structural breaks

et al. 2018

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“…The author then explains the technical concepts at the heart of cryptography which helped with the design and construction of this 21st century money. In another interesting paper, Baur et al (2015) argue that Bitcoin is a hybrid between precious metals and conventional currencies. The authors also show that Bitcoin is a useful diversifier (i.e.…”

Section: Introductionmentioning

confidence: 99%

On the return-volatility relationship in the Bitcoin market around the price crash of 2013

2017

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The authors examine the relation between price returns and volatility changes in the Bitcoin market using a daily database denominated in US dollar. The results for the entire period provide no evidence of an asymmetric return-volatility relation in the Bitcoin market. The authors test if there is a difference in the return-volatility relation before and after the price crash of 2013 and show a significant inverse relation between past shocks and volatility before the crash and no significant relation after. This finding shows that, prior to the price crash of December 2013, positive shocks increased the conditional volatility more than negative shocks. This inverted asymmetric reaction of Bitcoin to positive and negative shocks is contrary to what one observes in equities. As leverage effect and volatility feedback do not adequately explain this reaction, the authors propose the safe-haven effect (Baur, Asymmetric volatility in the gold market, 2012). They highlight the benefits of adding Bitcoin to a US equity portfolio, especially in the pre-crash period. Robustness analyses show, among others, a negative relation between the US implied volatility index (VIX) and Bitcoin volatility. Those additional analyses further support the findings and provide useful information for economic actors who are interested in adding Bitcoin to their equity portfolios or are curious about the capabilities of Bitcoin as a financial asset. JEL G11 G15

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“…However, this ideological perspective on r/bitcoin does continue face real world challenges. Recent challenges with Bitcoin's massive price drops in late 2018 [53], fraudulent exchange services [65], privacy issues [42], and the difficulty in predicting Bitcoin's future as an asset, currency, or investment [5,28] have led to doubts on r/bitcoin. These issues directly challenge the radical and hyperpositive aspirations of the "True Bitcoiner" ideology.…”

Section: :19mentioning

confidence: 99%

"The Most Trustworthy Coin"

Knittel

Pitts

Wash

2019

Proc. ACM Hum.-Comput. Interact.

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Bitcoin is an innovative technological network, a new, non-governmental currency, and a worldwide group of users. In other words, Bitcoin is a complex sociotechnical system with a complex set of risks and challenges for anyone using it. We investigated how everyday users of Bitcoin develop trust in Bitcoin on one of the largest online communities devoted to Bitcoin: the Reddit.com r/bitcoin forum. Using qualitative content analysis, we examined how trust in Bitcoin develops based on contributions to this community. On r/bitcoin, trust in Bitcoin is driven by a pervasive ideology we call the "True Bitcoiner" ideology. This ideological viewpoint in centered on the interpretation of Bitcoin as functionally "trustless" and risk-free. Despite widespread evidence of emerging individual and system-level risks with using Bitcoin, participants continue to maintain this ideological perspective. This ideology consists of three primary beliefs: viewing Bitcoin's technology as more trustworthy than its people; rejecting 'corrupt' social hierarchies related to money; and the importance of accumulating or 'HODLing' quantities of Bitcoin as a strategy to create an ideal future. We conclude that this "True Bitcoiner" ideology is maintained despite contradictory evidence in the world because it allows participants to more easily interpret Bitcoin and make decisions by reducing perceived risk and uncertainty in the system. The role of this ideology on r/bitcoin demonstrates an expanded conceptualization of how trust is created and socially-mediated in socio-technical contexts.

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Bitcoin: Currency or Investment?

Cited by 61 publications

References 25 publications

Modelling long memory volatility in the Bitcoin market: Evidence of persistence and structural breaks

Modelling long memory volatility in the Bitcoin market: Evidence of persistence and structural breaks

On the return-volatility relationship in the Bitcoin market around the price crash of 2013

"The Most Trustworthy Coin"

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