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Valuing cryptocurrencies: A model of price and hashrate

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  • Johnson, William C.

Abstract

We utilize a simplified framework exploiting the technological relationship between cryptocurrency prices and network mining inputs to develop a dynamic stochastic model for the pricing of cryptocurrencies. We test the model for Bitcoin, Ethereum, Monero, and Bitcoin Cash and find support for its major implications. While prices and hashrate for proof-of-work cryptocurrencies are non-stationary, they are cointegrated as suggested by the model. Prices are consistently higher than predicted by the discounted hashrate model, suggesting fixed costs for installing hardware mining capacity ranging from $23,970 for Monero to $385,840 for Bitcoin. Our approach allows miners to make value-maximizing decisions when installing and utilizing mining hardware.

Suggested Citation

  • Johnson, William C., 2025. "Valuing cryptocurrencies: A model of price and hashrate," Finance Research Letters, Elsevier, vol. 86(PA).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pa:s1544612325016009
    DOI: 10.1016/j.frl.2025.108346
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    References listed on IDEAS

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    1. Hamoon Soleimani, 2025. "The Endogenous Constraint: Hysteresis, Stagflation, and the Structural Inhibition of Monetary Velocity in the Bitcoin Network (2016-2025)," Papers 2512.07886, arXiv.org.

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