Price Fluctuations and the Use of Bitcoin: An Empirical Inquiry

International Journal of Electronic Commerce 20(1), pp. 9-49, 2015

60 Pages Posted: 1 Nov 2014 Last revised: 13 Nov 2017

See all articles by Michal Polasik

Michal Polasik

Nicolaus Copernicus University

Anna Piotrowska

Nicolaus Copernicus University

Tomasz Piotr Wisniewski

Open University, UK

Radosław Kotkowski

Warsaw School of Economics

Geoff Lightfoot

University of Leicester School of Management

Date Written: October 30, 2014

Abstract

Over recent years, interest has been growing in Bitcoin, an innovation which has the potential to play an important role in e-commerce and beyond. The aim of our paper is to provide a comprehensive empirical study of the payment and investment features of Bitcoin and their implications for the conduct of e-commerce. Since network externality theory suggests that the value of a network and its take-up are interlinked, we investigate both adoption and price formation. We discover that Bitcoin returns are driven primarily by its popularity, the sentiment expressed in newspaper reports on the cryptocurrency, and total number of transactions. The paper also reports on the first global survey of merchants who have adopted this technology and model the share of sales paid for with this alternative currency, using both ordinary and Tobit regressions. Our analysis examines how country, customer and company-specific characteristics interact with the proportion of sales attributed to Bitcoin. We find that company features, use of other payment methods, customers’ knowledge about Bitcoin, as well as the size of both the official and unofficial economy are significant determinants. The results presented allow a better understanding of the practical and theoretical ramifications of this innovation.

Keywords: Bitcoin, cryptocurrency, online payments, technology adoption, electronic commerce, electronic money, empirical research, emerging technology, financial services

JEL Classification: E42, E51, O33

Suggested Citation

Polasik, Michal and Piotrowska, Anna and Wisniewski, Tomasz Piotr and Kotkowski, Radosław and Lightfoot, Geoff, Price Fluctuations and the Use of Bitcoin: An Empirical Inquiry (October 30, 2014). International Journal of Electronic Commerce 20(1), pp. 9-49, 2015. Available at SSRN: https://ssrn.com/abstract=2516754 or http://dx.doi.org/10.2139/ssrn.2516754

Michal Polasik

Nicolaus Copernicus University ( email )

Gagarina 13A
Torun, 87-100
Poland
(0048) 56 611 4634 (Phone)

Anna Piotrowska

Nicolaus Copernicus University ( email )

Gagarina 11
Gagarina 13a
Torun, kujawsko-pomorskie 87-100
Poland

Tomasz Piotr Wisniewski

Open University, UK ( email )

Walton Hall
Milton Keynes, Buckinghamshire MK7 6AA
United Kingdom

Radosław Kotkowski

Warsaw School of Economics ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

Geoff Lightfoot (Contact Author)

University of Leicester School of Management ( email )

United Kingdom

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