The economics of Bitcoin and similar private digital currencies

Dwyer, Gerald P.

doi:10.1016/j.jfs.2014.11.006

Cited by 634 publications

(307 citation statements)

References 13 publications

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“…In contrast, irrational bubbles are formed when investors are driven by psychological factors unrelated to the asset's fundamental value. This can occur when investors resort to simple heuristics driven by market sentiments or via irrationally optimistic expectations, fashions and fads (Dwyer, 2014;Shiller, 2005;Weber, 2014). Under these circumstances, the relationship between fundamental value and price breaks down (Dale et al, 2005).…”

Section: Resultsmentioning

confidence: 99%

“…In order to serve as money Bitcoin should fulfil the roles of unit of account (Dwyer, 2014), means of payments and store of value. In this regard as the speculative aspects of Bitcoin dominates its other functions Bitcoin prices appear to be at the mercy of nothing more that market sentiments (Dwyer, 2014;Shiller, 2005;Weber, 2014). This has resulted in unpredictable volatility.…”

Section: Economic Considerationsmentioning

confidence: 99%

“…Much of the academic literature concentrates upon legal aspects and a more comprehensive analysis related to the fundamental value of these cryptocurrencies is needed. Any currency needs to fulfil a number of functions such as unit of account (Dwyer, 2014), means of payments and store of value. Fundamentally, Bitcoin should represent value.…”

Section: Introductionmentioning

confidence: 99%

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Speculative bubbles in Bitcoin markets? An empirical investigation into the fundamental value of Bitcoin

2015

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This is a PDF file of an unedited manuscript that has been accepted for publication. As a service to our customers we are providing this early version of the manuscript. The manuscript will undergo copyediting, typesetting, and review of the resulting proof before it is published in its final form. Please note that during the production process errors may be discovered which could affect the content, and all legal disclaimers that apply to the journal pertain. The cu rrent m arket valu e of the bitcoin m arket is cu rrently estim ated to be arou nd $3.3 billion  Bitcoins p rices contain a consid erable sp ecu lative com p onent  Bitcoin m arkets are su scep tible to bu bbles.  The fu nd am ental valu e of bitcoins is zero. Speculative bubbles in Bitcoin markets? An empirical investigation into the fundamental value of BitcoinEng-Tuck Cheah * John Fry † February 2015Abstract Amid its rapidly increasing usage and immense public interest the subject of Bitcoin has raised profound economic and societal issues. In this paper we undertake economic and econometric modelling of Bitcoin prices. As with many asset classes we show that Bitcoin exhibits speculative bubbles. Further, we find empirical evidence that the fundamental price of Bitcoin is zero.

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Section: Resultsmentioning

confidence: 99%

Section: Economic Considerationsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Speculative bubbles in Bitcoin markets? An empirical investigation into the fundamental value of Bitcoin

2015

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“…This kind of technology allows to exchange injected energy not only with energy at another time -like the energy credit does-but also allows the exchange with other currencies [42]. In contrast to other «alternative coins» (altcoins) [43], energy currencies creation depends on the amount of renewable energy being supplied, and akin to those kind of currencies, all the transactions are managed in a decentralized fashion through a peer-to-peer validation using a transaction (and creation) database (e.g. «BlockChain» in the case of Bitcoins).…”

Section: Energy Currenciesmentioning

confidence: 99%

Financial and environmental benefits of activedistribution networks

Serna-Suárez¹,

Ordóñez-Plata²,

Carrillo-Caicedo³

2018

revuin

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To identify the role and importance of local renewable energy resource integration on power distribution systems, this work presents a survey on how Active Distribution Systems capture benefits from this kind of energy resources. Also, this paper introduces the basic concepts of two economics tools that can help in the environmental valuation of local renewable energy projects, along with a discussion on the role of energy currencies in the development of renewable energy. As a conclusion, thanks to the advent of concepts such as "prosumer" and emergent technologies such as digital currencies, it is possible to achieve financial and economic viability for local renewable energy projects with the aid of Active Distribution Networks.

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“…In a recent paper, Dwyer (2015) provides an overview of private virtual currencies with a special focus on Bitcoin (being the most prominent example). The behaviour of Bitcoin's price since it began trading on electronic exchanges is analyzed, and the author provides a comparison of the volatility of Bitcoin's price on those exchanges compared with gold and foreign exchange.…”

Section: Literaturementioning

confidence: 99%

On the Value of Virtual Currencies

Bolt

Oordt

2016

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. ii Terms of use: Documents in EconStor may AbstractThis paper develops an economic framework to analyze the exchange rate of virtual currency. Three components are important: first, the current use of virtual currency to make payments; second, the decision of forward-looking investors to buy virtual currency (thereby effectively regulating its supply); and third, the elements that jointly drive future consumer adoption and merchant acceptance of virtual currency. The model predicts that, as virtual currency becomes more established, the exchange rate will become less sensitive to the impact of shocks to speculators' beliefs. This undermines the notion that excessive exchange rate volatility will prohibit widespread use of virtual currency. Bank topics: Asset pricing; E-money; Exchange rates JEL codes: E42, E51, F31, G1 RésuméNous construisons un modèle d'analyse pour cerner les facteurs qui influent sur le taux de change des monnaies virtuelles. Trois éléments importent : tout d'abord, l'utilisation actuelle d'une monnaie virtuelle comme moyen de paiement; ensuite, la décision d'investisseurs prospectifs d'acheter de la monnaie virtuelle (et de contrôler ainsi l'offre de ce type de monnaie); enfin, les facteurs qui détermineront ensemble l'adoption d'une monnaie virtuelle par les consommateurs et son acceptation par les commerçants. Selon les prévisions du modèle, lorsqu'une monnaie virtuelle devient plus établie, son taux de change devient moins sensible aux répercussions des changements non anticipés de croyance des spéculateurs. Ce résultat va à l'encontre de l'idée voulant que la très forte volatilité de leur taux de change empêchera la large diffusion des monnaies virtuelles. Sujets : Évaluation des actifs; Monnaie électronique; Taux de change Codes JEL : E42, E51, F31, G1 Non-Technical SummaryThis paper develops a theoretical framework to analyze the economic factors affecting the exchange rate for virtual currency. Virtual currencies, such as Bitcoin, represent both the emergence of a new form of currency and a new payment technology to purchase goods and services. These currencies may move outside the scope of current financial institutions, as they allow distant payments to be made directly between consumers and merchants without the use of any financial intermediaries. Moreover, their supply is not necessarily controlled by central banks, and speculative motives are widely believed to be an important factor for the value of virtual currencies.Sp...

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The economics of Bitcoin and similar private digital currencies

Cited by 634 publications

References 13 publications

Speculative bubbles in Bitcoin markets? An empirical investigation into the fundamental value of Bitcoin

Speculative bubbles in Bitcoin markets? An empirical investigation into the fundamental value of Bitcoin

Financial and environmental benefits of activedistribution networks

On the Value of Virtual Currencies

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