BitCoin's Roller Coaster: Systemic Risk and Market Sentiment

10 Pages Posted: 11 Jul 2016

See all articles by Panagiota Makrichoriti

Panagiota Makrichoriti

Athens University of Economics and Business - Department of Accounting and Finance

George Moratis

Athens University of Economics and Business

Date Written: July 11, 2016

Abstract

This study investigates the determinants of Bitcoin exchange rate over the period Feb. 2013-Apr. 2016 within a VAR framework. We are mainly driven by the narrow knowledge of this high volatile cryptocurrency’s behavior. We ask the question how and to what extent the overall credit and liquidity conditions affect Bitcoin. A novel feature of this paper is its important implications for the investors in order to understand Bitcoin’s determinants. Also, the empirical investigation is conducted by means of VAR model that permits the analysis of multi-directional relationships in a dynamic context. Our findings indicate that investor sentiment is the only important Bitcoin determinant among other factors which capture the overall economic situation, while spillover effects measured by the spillover matrix introduced by Diebold and Yilmaz (2009) indicate that Bitcoin appears to be a “lonely boat” that is mostly affected by “idiosyncratic” factors. Hence, it is very important for investors to gain knowledge on Bitcoin’s special characteristics, while paying attention to the investors sentiment.

Keywords: Cryptocurrency, Bitcoin, Systemic risk, Vector Autoregressive models

JEL Classification: C35, E44, F31, G15

Suggested Citation

Makrichoriti, Panagiota and Moratis, George, BitCoin's Roller Coaster: Systemic Risk and Market Sentiment (July 11, 2016). Available at SSRN: https://ssrn.com/abstract=2808096 or http://dx.doi.org/10.2139/ssrn.2808096

Panagiota Makrichoriti

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission Street
GR-104 34 Athens
Greece

George Moratis (Contact Author)

Athens University of Economics and Business ( email )

76 Patission Street
Athens, 104 34
Greece

Register to save articles to
your library

Register

Paper statistics

Downloads
462
rank
59,395
Abstract Views
1,362
PlumX Metrics