What are the main drivers of the Bitcoin price? Evidence from wavelet coherence analysis

PLoS One. 2015 Apr 15;10(4):e0123923. doi: 10.1371/journal.pone.0123923. eCollection 2015.

Abstract

The Bitcoin has emerged as a fascinating phenomenon in the Financial markets. Without any central authority issuing the currency, the Bitcoin has been associated with controversy ever since its popularity, accompanied by increased public interest, reached high levels. Here, we contribute to the discussion by examining the potential drivers of Bitcoin prices, ranging from fundamental sources to speculative and technical ones, and we further study the potential influence of the Chinese market. The evolution of relationships is examined in both time and frequency domains utilizing the continuous wavelets framework, so that we not only comment on the development of the interconnections in time but also distinguish between short-term and long-term connections. We find that the Bitcoin forms a unique asset possessing properties of both a standard financial asset and a speculative one.

Publication types

  • Research Support, Non-U.S. Gov't

MeSH terms

  • Commerce / statistics & numerical data*
  • Humans
  • Models, Economic*
  • Time Factors
  • Wavelet Analysis

Grant support

European Union's Seventh Framework Programme (FP7/2007-2013) under grant agreement No. FP7-SSH-612955 Czech Science Foundation project No. P402/12/G097 ``DYME -- Dynamic Models in Economics'' The Research Councils United Kingdom via Grant EP/K039830/1.