What Factors Give Cryptocurrencies Their Value: An Empirical Analysis

6 Pages Posted: 18 Mar 2015 Last revised: 25 Mar 2021

See all articles by Adam Hayes

Adam Hayes

University of Wisconsin - Madison - Department of Sociology; The New School - Department of Economics

Date Written: March 16, 2015

Abstract

This paper aims to identify the likely source(s) of value that cryptocurrencies exhibit in the marketplace using cross sectional empirical data examining 66 of the most used such 'coins'. A regression model was estimated that points to three main drivers of cryptocurrency value: the difficulty in 'mining' for coins; the rate of unit production; and the cryptologic algorithm employed. Bitcoin-denominated relative prices were used, avoiding much of the price volatility associated with the dollar exchange rate. The resulting model can be used to better understand the drivers of relative value observed in the emergent area of cryptocurrencies.

Keywords: Bitcoin, cryptocurrencies, altcoins, asset pricing, money, payment systems, currency exchanges

JEL Classification: D58, E42, E47, G1, L17, L86

Suggested Citation

Hayes, Adam, What Factors Give Cryptocurrencies Their Value: An Empirical Analysis (March 16, 2015). Available at SSRN: https://ssrn.com/abstract=2579445 or http://dx.doi.org/10.2139/ssrn.2579445

Adam Hayes (Contact Author)

University of Wisconsin - Madison - Department of Sociology ( email )

8128 William H. Sewell Social Sciences Building
1180 Observatory Drive
Madison, WI 53706
United States

The New School - Department of Economics ( email )

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New York, NY 10003
United States

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