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Equilibrium Bitcoin Pricing


  • Bruno Biais


  • Albert Menkveld

    (VU University Amsterdam)

  • Catherine Casamatta

    (Toulouse School of Economics)

  • Christophe Bisière

    (Université Toulouse Capitole)

  • Matthieu Bouvard

    (McGill University, Desautels Faculty)


We offer an overlapping generations equilibrium model of cryptocurrency pricing and confront it to new data on bitcoin transactional benefits and costs. The model emphasizes that the fundamental value of the cryptocurrency is the stream of net transactional benefits it will provide, which depend on its future prices. The link between future and present prices implies that returns can exhibit large volatility unrelated to fundamentals. We construct an index measuring the ease with which bitcoins can be used to purchase goods and services, and we also measure costs incurred by bitcoin owners. Consistent with the model, estimated transactional net benefits explain a statistically significant fraction of bitcoin returns.

Suggested Citation

  • Bruno Biais & Albert Menkveld & Catherine Casamatta & Christophe Bisière & Matthieu Bouvard, 2019. "Equilibrium Bitcoin Pricing," 2019 Meeting Papers 360, Society for Economic Dynamics.
  • Handle: RePEc:red:sed019:360

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    1. repec:eee:moneco:v:106:y:2019:i:c:p:16-26 is not listed on IDEAS
    2. Linda Schilling & Harald Uhlig, 2018. "Some Simple Bitcoin Economics," NBER Working Papers 24483, National Bureau of Economic Research, Inc.
    3. Ricardo Lagos & Randall Wright, 2005. "A Unified Framework for Monetary Theory and Policy Analysis," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 463-484, June.
    4. Julien Prat & Walter Benjamin, 2017. "An Equilibrium Model of the Market for Bitcoin Mining," Working Papers 2017-15, Center for Research in Economics and Statistics.
    5. Fantazzini, Dean & Nigmatullin, Erik & Sukhanovskaya, Vera & Ivliev, Sergey, 2016. "Everything you always wanted to know about bitcoin modelling but were afraid to ask. I," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 44, pages 5-24.
    6. Shiller, Robert J, 1981. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," American Economic Review, American Economic Association, vol. 71(3), pages 421-436, June.
    7. repec:eee:finlet:v:26:y:2018:i:c:p:81-88 is not listed on IDEAS
    8. Chiu, Jonathan & Koeppl, Thorsten V, 2017. "The economics of cryptocurrencies – bitcoin and beyond," Working Paper Series 6688, Victoria University of Wellington, School of Economics and Finance.
    9. Jonathan Chiu & Thorsten Koeppl, 2019. "The Economics of Cryptocurrencies—Bitcoin and Beyond," Staff Working Papers 19-40, Bank of Canada.
    10. Jonathan Chiu & Thorsten V. Koeppl, 2017. "The Economics Of Cryptocurrencies - Bitcoin And Beyond," Working Paper 1389, Economics Department, Queen's University.
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    Cited by:

    1. Bhambhwani, Siddharth & Delikouras, Stefanos & Korniotis, George, 2019. "Do Fundamentals Drive Cryptocurrency Prices?," CEPR Discussion Papers 13724, C.E.P.R. Discussion Papers.

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