A Simple Macroeconomic Model of Bitcoin

3 Pages Posted: 12 Feb 2014  

Joseph Chen-Yu Wang

Bitquant Research Laboratories

Date Written: February 11, 2014

Abstract

This working paper presents a simple model for the macroeconomic behavior of bitcoin based on the economic equation of exchange. According to this model, the value of bitcoin is determined largely by the willingness of bitcoin holders to save bitcoin and not by its transactional use. This model therefore predicts that increased use of bitcoin will not cause its value to rise, but that the value of bitcoin in terms of fiat currency will be almost solely determined by the willingness of bitcoin holders to pull bitcoin out of circulation. This model suggests that bitcoin will not fall victim to a liquidity trap as suggested by some economists.

Keywords: bitcoin,cryptocurrency

JEL Classification: E4, C00

Suggested Citation

Wang, Joseph Chen-Yu, A Simple Macroeconomic Model of Bitcoin (February 11, 2014). Available at SSRN: https://ssrn.com/abstract=2394024 or http://dx.doi.org/10.2139/ssrn.2394024

Joseph Chen-Yu Wang (Contact Author)

Bitquant Research Laboratories ( email )

3/F , Citicorp Centre
18 Whitfield Road
Tin Hau
Hong Kong

HOME PAGE: http://www.bitquant.com.hk/

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