Bitcoin and the Demand for Money: Is Bitcoin More Than Just a Speculative Asset?

47 Pages Posted: 7 Dec 2018

See all articles by Michael S. Pagano

Michael S. Pagano

Villanova University - Villanova School of Business

John Sedunov

Villanova University - Department of Finance

Date Written: October 25, 2018

Abstract

Is bitcoin money? We study the characteristics of bitcoin in the context of its use as money, following the theory of money demand first posited by Keynes (1935). Specifically, we answer three questions. First, is bitcoin used as a transactional currency? Yes. Second, is bitcoin used as a speculative currency? Yes. Third, is bitcoin used in a precautionary sense? No, although there are some weak results in support of this motive. We find this evidence using data on bitcoin returns and volume from 2010-2017, using a principal components analysis framework, supplemented with tests that incorporate specific elements of each component.

Suggested Citation

Pagano, Michael S. and Sedunov, John, Bitcoin and the Demand for Money: Is Bitcoin More Than Just a Speculative Asset? (October 25, 2018). Available at SSRN: https://ssrn.com/abstract=3293998 or http://dx.doi.org/10.2139/ssrn.3293998

Michael S. Pagano

Villanova University - Villanova School of Business ( email )

800 Lancaster Avenue
Villanova, PA 19085-1678
United States
(610) 519-4389 (Phone)

HOME PAGE: http://www90.homepage.villanova.edu/michael.pagano

John Sedunov (Contact Author)

Villanova University - Department of Finance ( email )

800 Lancaster Ave.
Villanova, PA 19085
United States
610-519-4374 (Phone)

HOME PAGE: http://homepage.villanova.edu/john.sedunov/

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