Abstract
This paper discusses how similar Bitcoin is to a commodity. The application of a number of both linear and non-linear GARCH models indicates that the role of extreme price movements is particularly pronounced. GARCH models with student-t innovations as well as combined jump-GARCH models are among the models with the best fit. The role of large movements is found to be stronger in the Bitcoin market than in the markets for crude oil and gold. As Bitcoin shares
with these exhaustible resource commodities characteristics such as the fixed supply, the analysis of Bitcoin prices can generally learn from the analysis of exhaustible resource commodities. However, whereas the short-run supply of gold and oil are uncertain, there are no uncertainties on the Bitcoin supply-side. Thus, the observed movements of Bitcoin prices can be interpreted as results of Bitcoin demand shocks.
with these exhaustible resource commodities characteristics such as the fixed supply, the analysis of Bitcoin prices can generally learn from the analysis of exhaustible resource commodities. However, whereas the short-run supply of gold and oil are uncertain, there are no uncertainties on the Bitcoin supply-side. Thus, the observed movements of Bitcoin prices can be interpreted as results of Bitcoin demand shocks.
Original language | English |
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Pages (from-to) | 86-92 |
Number of pages | 7 |
Journal | Journal of International Money and Finance |
Volume | 97 |
Early online date | 5 Jul 2019 |
DOIs | |
Publication status | Published - Oct 2019 |
Bibliographical note
The author gratefully acknowledges useful comments by Beat Hintermann and Stefan Trueck as well as seminar and conference participants at the Society for Computational Economics Annual Conference 2016, the CESifo Area Conference for Macro, Money and International Finance, University of Dundee, University of East Anglia, University College Dublin, and Macquarie University Sydney. Furthermore, the author is indebted to Sandrine Ngo for motivating me to study the economics of Bitcoins.Keywords
- Bitcoins
- GARCH
- Jump models
- Bitcoin demand shocks
- Price jumps
- Security of supply
- MARKET
- INEFFICIENCY
- RETURNS
- DYNAMICS
- EXCHANGE
- VOLATILITY