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Inf Syst E-Bus Manage (2016) 14:883919
DOI 10.1007/s10257-016-0304-0
ORIGINAL ARTICLE
Pavel Ciaian1 Miroslava Rajcaniova2
dArtis Kancs1
Received: 21 August 2014 / Revised: 30 June 2015 / Accepted: 4 January 2016 / Published online: 2 February 2016 The Author(s) 2016. This article is published with open access at Springerlink.com
Abstract This paper identies and analyzes BitCoin features which may facilitate BitCoin to become a global currency, as well as characteristics which may impede the use of BitCoin as a medium of exchange, a unit of account and a store of value, and compares BitCoin with standard currencies with respect to the main functions of money. Among all analyzed BitCoin features, the extreme price volatility stands out most clearly compared to standard currencies. In order to understand the reasons for such extreme price volatility, we attempt to identify drivers of BitCoin price formation and estimate their importance econometrically. We apply time-series analytical mechanisms to daily data for the 20092014 period. Our estimation results suggest that BitCoin attractiveness indicators are the strongest drivers of BitCoin price followed by market forces. In contrast, macro-nancial developments do not determine BitCoin price in the long-run. Our ndings suggest that as long as Bit-Coin price will be mainly driven by speculative investments, BitCoin will not be able to compete with standard currencies.
Keywords BitCoin Virtual currency Exchange rate Supply and demand
Financial indicators Attention-driven investment
1 Introduction
A wide range of virtual currencies have emerged during the last decade, such as BitCoin, LiteCoin, PeerCoin, AuroraCoin, DogeCoin and Ripple. The most successful among them is BitCoin, both in terms of its impressive growth in the
& Pavel Ciaian [email protected]
1 European Commission, DG Joint Research Centre, C/Inca Garcilaso, 3, 41092 Seville, Spain
2 Slovak University of Agriculture (SUA), Nitra, Slovakia
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number of currency users and popularity by retailers. Since its introduction in 2009, BitCoin has been characterized also by a phenomenal increase in the number of transactions and market capitalization, which surpassed 5 billion US dollar in 2015 and since then has recorded further growth.
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