Value or Bubble? A Decomposition of the Bitcoin Price

25 Pages Posted: 22 Nov 2015 Last revised: 28 Dec 2015

See all articles by Yun Ling

Yun Ling

University of Southern California - Marshall School of Business

Date Written: May 27, 2015

Abstract

In this study, I analyze Bitcoin transaction data and build an economic model on Bitcoin traders incentives to decompose the Bitcoin price into a utility-driven component, a speculative component, and a friction component. The model I build extends the LDA (Latent-Dirichlet-Allocation) model, and I perform a paralleled collapsed Gibbs Sampling method to estimate the realized incentives of each individual trader at each time point. For post-estimation analysis, I look into major headline news to see which how information or rumor affects the different components of the Bitcoin price. The preliminary results show interesting patterns of trading and pricing in the Bitcoin market for the first time.

Keywords: Bitcoin, Cryptocurrency, Transaction, Machine Learning

JEL Classification: E19, L10

Suggested Citation

Ling, Yun, Value or Bubble? A Decomposition of the Bitcoin Price (May 27, 2015). Available at SSRN: https://ssrn.com/abstract=2693885 or http://dx.doi.org/10.2139/ssrn.2693885

Yun Ling (Contact Author)

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

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