Factors Influencing Cryptocurrency Prices: Evidence from Bitcoin, Ethereum, Dash, Litcoin, and Monero
Journal of Economics and Financial Analysis, 2(2), 1-27
27 Pages Posted: 26 Feb 2018 Last revised: 13 Mar 2018
Date Written: February 17, 2018
This paper examines factors that influence prices of most common five cryptocurrencies such Bitcoin, Ethereum, Dash, Litecoin, and Monero over 2010-2018 using weekly data. The study employs ARDL technique and documents several findings. First, cryptomarket-related factors such as market beta, trading volume, and volatility appear to be significant determinant for all five cryptocurrencies both in short- and long-run. Second, attractiveness of cryptocurrencies also matters in terms of their price determination, but only in long-run. This indicates that formation (recognition) of the attractiveness of cryptocurrencies are subjected to time factor. In other words, it travels slowly within the market. Third, SP500 index seems to have weak positive long-run impact on Bitcoin, Ethereum, and Litcoin, while its sign turns to negative losing significance in short-run, except Bitcoin that generates an estimate of -0.20 at 10% significance level.
Lastly, error-correction models for Bitcoin, Etherem, Dash, Litcoin, and Monero show that cointegrated series cannot drift too far apart, and converge to a long-run equilibrium at a speed of 23.68%, 12.76%, 10.20%, 22.91%, and 14.27% respectively.
Keywords: Cryptocurrency, Bitcoin, Ethereum, Cointegration, ARDL Bound Test, Error Correction Model, Cryptocurrency Analysis, Cryptocurrency Price determinants.
JEL Classification: G12, D40, C51, C59.
Suggested Citation: Suggested Citation