Equilibrium Bitcoin Pricing

41 Pages Posted: 17 Oct 2018

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

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

Catherine Casamatta

TSE-University of Toulouse 1

Albert J. Menkveld

VU Amsterdam; Tinbergen Institute

Date Written: July 10, 2020

Abstract

We offer an equilibrium model of cryptocurrency pricing and confront it to new data on bitcoin transactional benefits and costs. The model emphasises that the fundamental value of the cryptocurrency is the stream of net transactional benefits it will provide, which depend on its future prices. The link between future and present prices implies that returns can exhibit large volatility, unrelated to fundamentals. We construct an index measuring the ease with which bitcoins can be used to purchase goods and services, and we also measure costs incurred by bitcoin owners. Consistent with the model, estimated transactional net benefits explain a statistically significant fraction of bitcoin returns.

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

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 (July 10, 2020). 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

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

Place Anatole-France
Toulouse Cedex, F-31042
France

Catherine Casamatta

TSE-University of Toulouse 1 ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Albert J. Menkveld (Contact Author)

VU Amsterdam ( email )

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

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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