How to Price a Digital Currency? Empirical Insights on the Influence of Media Coverage on the Bitcoin Bubble

MKWI 2014 (Paderborn) & Banking and Information Technology, Vol.15, No. 1, 2014

Posted: 29 Apr 2014 Last revised: 21 May 2015

See all articles by Florian Glaser

Florian Glaser

Goethe University Frankfurt Faculty of Economics and Business Administration; Karlsruhe Institute of Technology

Martin Haferkorn

Goethe University Frankfurt Faculty of Economics and Business Administration; European Securities and Markets Authority (ESMA)

Moritz Christian Weber

Goethe University Frankfurt Faculty of Economics and Business Administration

Kai Zimmermann

Goethe University Frankfurt Faculty of Economics and Business Administration

Date Written: April 29, 2014

Abstract

Digital currencies are gaining more and more attention against the backdrop of recent events triggered by the ongoing economic crisis. While digital currencies face increasing popularity, the currencies' prices are free floating and subject to high volatility as a result of lacking fundamental valuation methods. On the basis of an overview over the most prominent currency -- Bitcoin -- and an economic literature review we propose an econometric model that incorporates the basic components of the current price discovery process of a digital currency's exchange rate. On the basis of our empirical validation we further show that, in the case of Bitcoin, price volatility is significantly influenced by the media coverage and positive sentiment.

Keywords: Bitcoin, Digital Currency, Investor Behavior, Media Coverage, Virtual Currency

JEL Classification: G00, G10, G11

Suggested Citation

Glaser, Florian and Glaser, Florian and Haferkorn, Martin and Haferkorn, Martin and Weber, Moritz Christian and Zimmermann, Kai, How to Price a Digital Currency? Empirical Insights on the Influence of Media Coverage on the Bitcoin Bubble (April 29, 2014). MKWI 2014 (Paderborn) & Banking and Information Technology, Vol.15, No. 1, 2014, Available at SSRN: https://ssrn.com/abstract=2430653

Florian Glaser (Contact Author)

Goethe University Frankfurt Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 4
Frankfurt am Main, 60323
Germany

Karlsruhe Institute of Technology ( email )

Kaiserstraße 12
Karlsruhe, Baden Württemberg 76131
Germany

Martin Haferkorn

European Securities and Markets Authority (ESMA) ( email )

201-203 Rue de Bercy
​Paris, 75012
France

Goethe University Frankfurt Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 4
Frankfurt am Main, 60323
Germany

Moritz Christian Weber

Goethe University Frankfurt Faculty of Economics and Business Administration ( email )

Grueneburgplatz 1
Frankfurt am Main, 60323
Germany

Kai Zimmermann

Goethe University Frankfurt Faculty of Economics and Business Administration ( email )

Grueneburgplatz 1
Frankfurt am Main, 60323
Germany

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