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Exploring co-explosive dynamics: Bitcoin price, attractiveness, and sentiment variables

Author

Listed:
  • de Prince, Diogo
  • Marçal, Emerson Fernandes
  • Valls Pereira, Pedro L.

Abstract

This study applies a co-explosive VAR model based on the methodologies of Nielsen (2010) and Engsted and Nielsen (2012). to estimate the determinants of Bitcoin price in the long term such as the gold price, S&P500, Google searches for Bitcoin, and the financial stress index. We explore the co-explosive dynamics between Bitcoin’s price and these factors. Using weekly data spanning from October 4, 2013, to September 24, 2021, the research uncovers a four-explosive-root relationship with Bitcoin’s price. Our primary emphasis is on the interaction between Bitcoin’s price and Google search interest. Enhanced Google search activity is correlated with an increase in Bitcoin’s price in the long term. The Bitcoin price and Google search volumes adjust to long-term deviations from their established relationship, classifying them as explosive variables. This behavior of Bitcoin’s price is consistent with existing literature that highlights its inherently explosive nature.

Suggested Citation

  • de Prince, Diogo & Marçal, Emerson Fernandes & Valls Pereira, Pedro L., 2025. "Exploring co-explosive dynamics: Bitcoin price, attractiveness, and sentiment variables," Economics Letters, Elsevier, vol. 246(C).
    • Handle: RePEc:eee:ecolet:v:246:y:2025:i:c:s0165176524005561
    DOI: 10.1016/j.econlet.2024.112072
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    Keywords

    Co-explosive dynamics; Bitcoin price; Sentiment variables;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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