Bitcoin: Medium of Exchange or Speculative Assets?

31 Pages Posted: 7 Feb 2015 Last revised: 26 Sep 2017

See all articles by Dirk G. Baur

Dirk G. Baur

University of Western Australia - Business School; Financial Research Network (FIRN)

Kihoon Hong

University of Technology Sydney (UTS)

Adrian D. Lee

University of Technology, Sydney - Finance Discipline Group; Financial Research Network (FIRN)

Date Written: September 26, 2017

Abstract

Bitcoin is defined as digital money within a decentralized peer-to-peer payment network. It is a hybrid between fiat currency and commodity currency without intrinsic value and independent of any government or monetary authority. This paper analyses the question of whether Bitcoin is a medium of exchange or an asset and more specifically, what is its current usage and what usage will prevail in the future given its characteristics. We analyse the statistical properties of Bitcoin and find that it is uncorrelated with traditional asset classes such as stocks, bonds and commodities both in normal times and in periods of financial turmoil. The analysis of transaction data of Bitcoin accounts shows that Bitcoins are mainly used as a speculative investment and not as an alternative currency and medium of exchange.

Keywords: Bitcoin; digital currency; alternative currency; medium of exchange; asset class; safe haven

Suggested Citation

Baur, Dirk G. and Hong, Kihoon and Lee, Adrian D., Bitcoin: Medium of Exchange or Speculative Assets? (September 26, 2017). Available at SSRN: https://ssrn.com/abstract=2561183 or http://dx.doi.org/10.2139/ssrn.2561183

Dirk G. Baur (Contact Author)

University of Western Australia - Business School ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Kihoon Hong

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

Adrian D. Lee

University of Technology, Sydney - Finance Discipline Group ( email )

PO Box 123
UTS Haymarket Campus
Broadway, NSW 2007
Australia
95147765 (Phone)
95147722 (Fax)

HOME PAGE: http://https://www.uts.edu.au/staff/adrian.lee

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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