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Will Bitcoin ever become less volatile?

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  • Kristoufek, Ladislav

Abstract

We examine the drivers of Bitcoin volatility and discuss possible future developments, specifically what conditions need to be met for the volatility to decrease. Our instrumental variables analysis implies there needs to be a considerable inflow of small users into the system who are ideally not exchange traders and they do perform small transfers. Increasing exchange volume, on-chain transfers value, and Bitcoin price by themselves increase volatility of the cryptoasset.

Suggested Citation

  • Kristoufek, Ladislav, 2023. "Will Bitcoin ever become less volatile?," Finance Research Letters, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322005311
    DOI: 10.1016/j.frl.2022.103353
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Cryptocurrencies; Cryptoassets; Bitcoin; Volatility; Store of value;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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