Competition in the Cryptocurrency Market

32 Pages Posted: 9 Oct 2014 Last revised: 16 Mar 2018

See all articles by Hanna Halaburda

Hanna Halaburda

New York University (NYU) - Leonard N. Stern School of Business

Neil Gandal

Berglas School of Economics, Tel Aviv University; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: June 27, 2016

Abstract

We analyze how network effects affect competition in the nascent cryptocurrency market. We do so by examining the changes over time in exchange rate data among cryptocurrencies. Specifically, we look at two aspects: (1) competition among different currencies, and (2) competition among exchanges where those currencies are traded. Our data suggest that the winner-take-all effect is dominant early in the market. During this period, when Bitcoin becomes more valuable against the U.S. dollar, it also becomes more valuable against other cryptocurrencies. This trend is reversed in the later period. The data in the later period are consistent with the use of cryptocurrencies as financial assets (popularized by Bitcoin), and not consistent with "winner-take-all" dynamics.

Keywords: bitcoin, cryptocurrency, network effects

JEL Classification: L17, L86

Suggested Citation

Halaburda, Hanna and Gandal, Neil, Competition in the Cryptocurrency Market (June 27, 2016). NET Institute Working Paper No. 14-17. Available at SSRN: https://ssrn.com/abstract=2506463 or http://dx.doi.org/10.2139/ssrn.2506463

Hanna Halaburda

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
New York, NY NY 10012
United States

Neil Gandal (Contact Author)

Berglas School of Economics, Tel Aviv University ( email )

Tel Aviv University
Tel Aviv 69978
Israel
+972 3 640 9907 (Phone)
+972 3 640 9908 (Fax)

HOME PAGE: http://www.neilgandal.com/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
2,144
Abstract Views
6,160
rank
5,705
PlumX Metrics