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Do Major Currency Trading Volumes Explain the Rise of Bitcoin’s Price?

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  • Jordan Evans
  • Christopher C. Klein

Abstract

We examine the determinants of the Bitcoin price over the period from September 2012 to September 2017. Unlike conventional currency demand models, trading volume is negatively related to the Bitcoin price and the frequency of Internet searches for the term Bitcoin is positively associated with the price. We find strong and significant time trends in the Bitcoin price. These results suggest that the rise in Bitcoin’s price during our observation period was driven largely by speculation.

Suggested Citation

  • Jordan Evans & Christopher C. Klein, 2018. "Do Major Currency Trading Volumes Explain the Rise of Bitcoin’s Price?," Journal for Economic Educators, Middle Tennessee State University, Business and Economic Research Center, vol. 18(1), pages 39-45, Spring.
    • Handle: RePEc:mts:jrnlee:v:18:y:2018:i:1:p:39-45
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    References listed on IDEAS

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    1. Pavel Ciaian & Miroslava Rajcaniova & d’Artis Kancs, 2016. "The economics of BitCoin price formation," Applied Economics, Taylor & Francis Journals, vol. 48(19), pages 1799-1815, April.
    2. Yechen Zhu & David Dickinson & Jianjun Li, 2017. "Erratum to: Analysis on the influence factors of Bitcoin’s price based on VEC model," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 3(1), pages 1-1, December.
    3. David Yermack, 2013. "Is Bitcoin a Real Currency? An economic appraisal," NBER Working Papers 19747, National Bureau of Economic Research, Inc.
    4. Ladislav Kristoufek, 2015. "What Are the Main Drivers of the Bitcoin Price? Evidence from Wavelet Coherence Analysis," PLOS ONE, Public Library of Science, vol. 10(4), pages 1-15, April.
    5. Dyhrberg, Anne Haubo, 2016. "Bitcoin, gold and the dollar – A GARCH volatility analysis," Finance Research Letters, Elsevier, vol. 16(C), pages 85-92.
    6. Yechen Zhu & David Dickinson & Jianjun Li, 2017. "Analysis on the influence factors of Bitcoin’s price based on VEC model," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 3(1), pages 1-13, December.
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    More about this item

    Keywords

    bitcoin; cryptocurrency; speculation;
    All these keywords.

    JEL classification:

    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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