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Bitcoin pricing: impact of attractiveness variables

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  • Rodrigo Hakim das Neves

    (Sao Paulo School Of Economics (FGV))

Abstract

The research seeks to contribute to Bitcoin pricing analysis based on the dynamics between variables of attractiveness and the value of the digital currency. Using the error correction model, the relationship between the price of the virtual currency, Bitcoin, and the number of Google searches that used the terms bitcoin, bitcoin crash and crisis between December 2012 and February 2018 is analyzed. The study also applied the same analysis to prices of Bitcoin denominated in different sovereign currencies traded during the same period. The Johansen (J Econ Dyn Control 12:231-254, 1988) test demonstrates that the price and number of searches on Google for the first two terms are cointegrated. This research indicates that there are strong short-term and long-term dynamics among attractiveness factors, suggesting that an increase in worldwide interest in Bitcoin is usually preceded by a price increase. In contrast, an increase in market mistrust over a collapse of the currency, as measured by the term bitcoin crash, is followed by a fall in price. Intense world economic crisis events appear to have a strong impact on interest in the virtual currency. This study demonstrates that during a worldwide crisis Bitcoin becomes an alternative investment, increasing its price. Based on it, bitcoin may be used as a safe haven by the financial market and its intrinsic characteristics might help the investors and governments to find new mechanisms to deal with monetary transactions.

Suggested Citation

  • Rodrigo Hakim das Neves, 2020. "Bitcoin pricing: impact of attractiveness variables," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-18, December.
    • Handle: RePEc:spr:fininn:v:6:y:2020:i:1:d:10.1186_s40854-020-00176-3
    DOI: 10.1186/s40854-020-00176-3
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    Cited by:

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    2. Virginie Terraza & Aslı Boru İpek & Mohammad Mahdi Rounaghi, 2024. "The nexus between the volatility of Bitcoin, gold, and American stock markets during the COVID-19 pandemic: evidence from VAR-DCC-EGARCH and ANN models," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-34, December.
    3. Panagiotis Anastasiadis & Stephanos Papadamou, 2022. "The dimension of popularity in the cryptocurrency market," SN Business & Economics, Springer, vol. 2(5), pages 1-15, May.
    4. Eray Gemici & Muslum Polat & Remzi Gök & Muhammad Asif Khan & Mohammed Arshad Khan & Yunus Kilic, 2023. "Do Bubbles in the Bitcoin Market Impact Stock Markets? Evidence From 10 Major Stock Markets," SAGE Open, , vol. 13(2), pages 21582440231, June.
    5. Muhammad Owais Qarni & Saiqb Gulzar, 2021. "Portfolio diversification benefits of alternative currency investment in Bitcoin and foreign exchange markets," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-37, December.
    6. Serdar Neslihanoglu, 2021. "Linearity extensions of the market model: a case of the top 10 cryptocurrency prices during the pre-COVID-19 and COVID-19 periods," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-27, December.
    7. A. H. Nzokem, 2023. "Bitcoin versus S&P 500 Index: Return and Risk Analysis," Papers 2310.02436, arXiv.org.
    8. Nuray Tosunoğlu & Hilal Abacı & Gizem Ateş & Neslihan Saygılı Akkaya, 2023. "Artificial neural network analysis of the day of the week anomaly in cryptocurrencies," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-24, December.
    9. Jong-Min Kim & Chanho Cho & Chulhee Jun, 2022. "Forecasting the Price of the Cryptocurrency Using Linear and Nonlinear Error Correction Model," JRFM, MDPI, vol. 15(2), pages 1-10, February.
    10. Ji Ho Kwon, 2021. "On the factors of Bitcoin’s value at risk," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-31, December.

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