Boost and Burst: Bubbles in the Bitcoin Market

Lee, Nam-Kyoung; Yi, Eunjou; Ahn, Kwangwon

doi:10.1007/978-3-030-50371-0_31

Cited by 5 publications

(2 citation statements)

References 29 publications

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“…There are studies focused on market manipulations, effects of monetary policy, interconnectivity between cryptocurrency markets, influence of the media, social networks on demand, etc. (Garcia et al, 2014;Urquhart, 2016;Gandal et al, 2018;Corbet et al, 2017;Bouri et al, 2019;Lee et al, 2020;Caferra et al, 2021;Li et al, 2022). On the other hand, there are studies on the statistical behavior of Bitcoin prices.…”

Section: Literature Reviewmentioning

confidence: 99%

Bitcoin’s bubbly behaviors: does it resemble other financial bubbles of the past?

Náñez Alonso,

Jorge-Vázquez,

Echarte Fernández

et al. 2024

Humanit Soc Sci Commun

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A number of financial bubbles have occurred throughout history. The objective of this study was to identify the main similarities between Bitcoin price behavior during bubble periods and a number of historical bubbles. Once this had been carried out, we aimed to determine whether the solutions adopted in the past would be effective in the present to reduce investors’ risk in this digital asset. This study brings a new approach, as studies have previously been conducted analyzing the similarity of Bitcoin bubbles to other bubbles individually, but these were not conducted in such a broad manner, addressing different types of bubbles, and over such a broad time period. Starting from a dataset with 9967 records, a combined methodology was used. This consisted of an analysis of the standard deviations, the growth rates of the prices of the assets involved, the percentage increase in asset prices from the origin of the bubble to its peak and its fundamental value, and, finally, the bubble index. Lastly, correlation statistical analysis was performed. The results obtained from the combination of the above methods reveal the existence of certain similarities between the Bitcoin bubbles (2011, 2013, 2017, and 2021) and the tulip bubble (1634–1637) and the Mississippi bubble (1719–1720). We find that the vast majority of the measures taken to avoid past bubbles will not be effective now; this is due to the digital and decentralized nature of Bitcoin. A limitation of the study is the difficulty in making a comparison between bubbles that occurred at different historical points in time. However, the results obtained shed light and provide guidance on the actions to be taken by regulators to ensure the protection of investors in this digital asset.

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Section: Literature Reviewmentioning

confidence: 99%

Bitcoin’s bubbly behaviors: does it resemble other financial bubbles of the past?

Náñez Alonso,

Jorge-Vázquez,

Echarte Fernández

et al. 2024

Humanit Soc Sci Commun

View full text Add to dashboard Cite

show abstract

“…where 𝜌 𝑠 (𝑥) is the stationary solution of the FP equation. Then, the Schrödinger equation can be expressed as 5 A SDE is a mathematical model that is widely used to describe various phenomena exhibiting random behavior in a financial market such as geometric Brownian motion [48], stochastic volatility [49], jump processes [50][51][52], controlled growth processes [53], and processes evolving according to a size-independent proportional growth rate after an exponentially distributed period of time [54]. ,…”

Section: Quantum Harmonic Oscillatormentioning

confidence: 99%