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An Analysis of Bitcoin’s Price Dynamics

Author

Listed:
  • Frode Kjærland

    (NTNU Business School, Norwegian University of Science and Technology, 7491 Trondheim, Norway
    Nord University Business School, Nord University, 8049 Bodø, Norway)

  • Aras Khazal

    (NTNU Business School, Norwegian University of Science and Technology, 7491 Trondheim, Norway)

  • Erlend A. Krogstad

    (NTNU Business School, Norwegian University of Science and Technology, 7491 Trondheim, Norway)

  • Frans B. G. Nordstrøm

    (NTNU Business School, Norwegian University of Science and Technology, 7491 Trondheim, Norway)

  • Are Oust

    (NTNU Business School, Norwegian University of Science and Technology, 7491 Trondheim, Norway)

Abstract

This paper aims to enhance the understanding of which factors affect the price development of Bitcoin in order for investors to make sound investment decisions. Previous literature has covered only a small extent of the highly volatile period during the last months of 2017 and the beginning of 2018. To examine the potential price drivers, we use the Autoregressive Distributed Lag and Generalized Autoregressive Conditional Heteroscedasticity approach. Our study identifies the technological factor Hashrate as irrelevant for modeling Bitcoin price dynamics. This irrelevance is due to the underlying code that makes the supply of Bitcoins deterministic, and it stands in contrast to previous literature that has included Hashrate as a crucial independent variable. Moreover, the empirical findings indicate that the price of Bitcoin is affected by returns on the S&P 500 and Google searches, showing consistency with results from previous literature. In contrast to previous literature, we find the CBOE volatility index (VIX), oil, gold, and Bitcoin transaction volume to be insignificant.

Suggested Citation

  • Frode Kjærland & Aras Khazal & Erlend A. Krogstad & Frans B. G. Nordstrøm & Are Oust, 2018. "An Analysis of Bitcoin’s Price Dynamics," JRFM, MDPI, vol. 11(4), pages 1-18, October.
    • Handle: RePEc:gam:jjrfmx:v:11:y:2018:i:4:p:63-:d:175742
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    References listed on IDEAS

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