Equilibrium Bitcoin Pricing

69 Pages Posted: 17 Oct 2018 Last revised: 11 Nov 2021

See all articles by Bruno Biais

Bruno Biais

University of Toulouse 1 - Toulouse School of Economics (TSE)

Christophe Bisiere

Universite de Toulouse - (IDEI - CRG)

Matthieu Bouvard

Toulouse School of Economics, University Toulouse Capitole (TSM-Research)

Catherine Casamatta

Toulouse School of Economics, University Toulouse Capitole (TSM-Research)

Albert J. Menkveld

Vrije Universiteit Amsterdam

Date Written: November 9, 2021

Abstract

We offer a general equilibrium analysis of cryptocurrency pricing. The fundamental value of the cryptocurrency is its stream of net transactional benefits, which depend on its future prices. This implies that, in addition to fundamentals, equilibrium prices reflect sunspots. This, in turn, implies there are multiple equilibria and extrinsic volatility, i.e., cryptocurrency prices fluctuate even when fundamentals are constant. To match our model to the data, we construct indices measuring the net transactional benefits of bitcoin. In our calibration, a fraction of the variations in bitcoin returns reflects changes in net transactional benefits, but a larger fraction reflects extrinsic volatility.

Keywords: cryptocurrency, asset pricing, bitcoin, equilibrium, calibration

JEL Classification: G1, G2, L86

Suggested Citation

Biais, Bruno and Bisiere, Christophe and Bouvard, Matthieu and Casamatta, Catherine and Menkveld, Albert J., Equilibrium Bitcoin Pricing (November 9, 2021). Available at SSRN: https://ssrn.com/abstract=3261063 or http://dx.doi.org/10.2139/ssrn.3261063

Bruno Biais

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Christophe Bisiere

Universite de Toulouse - (IDEI - CRG) ( email )

Manufacture des Tabacs
21 Allee de Brienne bat. F
Toulouse Cedex, F-31000
France

Matthieu Bouvard

Toulouse School of Economics, University Toulouse Capitole (TSM-Research) ( email )

Toulouse
France

Catherine Casamatta

Toulouse School of Economics, University Toulouse Capitole (TSM-Research) ( email )

Toulouse
France

Albert J. Menkveld (Contact Author)

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
+31 20 5986130 (Phone)
+31 20 5986020 (Fax)

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