What Are the Main Drivers of the Bitcoin Price? Evidence from Wavelet Coherence Analysis

Abstract

The Bitcoin has emerged as a fascinating phenomenon in the Financial markets. Without any central authority issuing the currency, the Bitcoin has been associated with controversy ever since its popularity, accompanied by increased public interest, reached high levels. Here, we contribute to the discussion by examining the potential drivers of Bitcoin prices, ranging from fundamental sources to speculative and technical ones, and we further study the potential influence of the Chinese market. The evolution of relationships is examined in both time and frequency domains utilizing the continuous wavelets framework, so that we not only comment on the development of the interconnections in time but also distinguish between short-term and long-term connections. We find that the Bitcoin forms a unique asset possessing properties of both a standard financial asset and a speculative one.

A Statistical Analysis of Cryptocurrencies

“…Perhaps surprisingly, the results indicate that Bitcoin offers little correlation with other assets, although it can help to diversify investment portfolios. In Kristoufek (2015), the influencing factors of the price of Bitcoin are investigated and applied to the Chinese Bitcoin market. Short and long term links are found, and Bitcoin is shown to exhibit the properties of both standard financial assets but also speculative assets, which fuel further discussion on whether Bitcoin should be classed as a currency, asset or an investment vehicle.…”

Bitcoin Piyasalarının Etkinliği, Likiditesi ve Oynaklığı (Efficiency, Liquidity and Volatility of Bitcoin Markets)

“…Mt.Gox ve Btce en yüksek işlem hacmine sahip borsalar olarak, fiyat oluşumunda lider bulunurken, beklendiği gibi küçük borsalar, fiyat oluşumunda rol almayıp pazarı takip eder konumda bulunmuştur. Kristoufek (2015) Bitcoin fiyatlarını etkileyen faktörleri incelemiştir ve aslında inanılanın aksine Bitcoin 'in spekülatif olmadığını ileri sürmüştür. Çalışmada, Bitcoin fiyatını etkileyen faktörler olarak, ticarette kullanım yaygınlığı, tedarik miktarı ve fiyat seviyesi gösterilmiştir ki bu da standart bir para biriminin değerini etkileyen faktörlerdir.…”

“…Çalışmada, Bitcoin fiyatını etkileyen faktörler olarak, ticarette kullanım yaygınlığı, tedarik miktarı ve fiyat seviyesi gösterilmiştir ki bu da standart bir para biriminin değerini etkileyen faktörlerdir. Fakat Kristoufek (2015) daha önce yaşanan aşırı düşüş ve artışları da göz önünde bulundurmuş ve Bitcoin'in hala finansal anlamda güvenli bir liman olmaya uzak olduğunu belirtmiştir. Cheah (2015) Bitcoin fiyatlarını araştırdığı çalışmasında, benzer bulgulara ulaşmış ve fiyatlandırmada balonların olduğunu belirtmiştir.…”

Barriers to the Functioning of the Bitcoin System – User Assessment

“…System participants started seeing bitcoin is a type of alternative investment, rather than an instrument for making payments. This is also reflected in papers in the field of finance referring to the issue of bitcoin as they often analyse the behaviour of the cryptocurrency's quotations (Kristoufek, 2015;Brandvold, Molnar, Vagstad, Valstad, 2015;Baek, M. Elbeck, 2015;Cheung, Roca, Su, 2015;Ciaian, Rajcaniova, Kancs 2016). The study of available literature on the subject has shown that relatively little attention has been devoted to the use of bitcoin in payments (Polasik, Piotrowska, Wiśniewski, Kotkowski, Lightfoot, 2015;Leung, Dickinger, 2017;Schuh, Shy, 2015) and that the adopted systemic solutions were not perceived as a particularly significant limitation on the basic function of bitcoin.…”