Valuation, Liquidity Price, and Stability of Cryptocurrencies
Proceedings of the National Academy of Sciences 115, 1131-1134 (2018)
7 Pages Posted: 6 Mar 2018
Date Written: October 16, 2017
Cryptocurrencies are examined through the asset flow equations and experimental asset markets. Since tangible value of a typical cryptocurrency is non-existent, the theory suggests that price will gravitate toward liquidity value, i.e., the total amount of cash available for purchase of the asset divided by the number of units. Thus it is unlikely that cryptocurrencies in their current form will be stable in the absence of a mechanism of a link to value.
Keywords: cryptocurrency, bitcoin, bubble, valuation, liquidity price, stability
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