Blockchain Characteristics and Cryptocurrency Returns

54 Pages Posted: 6 Mar 2019 Last revised: 10 Jun 2023

See all articles by Siddharth Bhambhwani

Siddharth Bhambhwani

Arkansas Tech University

Stefanos Delikouras

University of Miami - Department of Finance

George M. Korniotis

University of Miami - Department of Finance

Date Written: May 31, 2023

Abstract

We examine whether blockchain characteristics such as network size and computing power affect cryptocurrency prices and returns. Network size reflects adoption and usage of the blockchain while computing power proxies for the real-world resources expended on securing and confirming transactions. Consistent with theoretical models, we find that cryptocurrency prices exhibit comovement with these two blockchain characteristics. Further, aggregate network and computing power explain the variation in expected cryptocurrency returns at least as well as models with return-based factors such as market, size, and momentum. Overall, our results show that blockchain-based factors are important for explaining cryptocurrency prices and returns.

Keywords: Hashrate, Network, Factor Analysis, GMM, Rolling Estimation

JEL Classification: E4, G12, G15

Suggested Citation

Bhambhwani, Siddharth and Delikouras, Stefanos and Korniotis, George M., Blockchain Characteristics and Cryptocurrency Returns (May 31, 2023). Journal of International Financial Markets, Institutions and Money, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3342842 or http://dx.doi.org/10.2139/ssrn.3342842

Siddharth Bhambhwani (Contact Author)

Arkansas Tech University ( email )

AR
United States

Stefanos Delikouras

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

George M. Korniotis

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States
305-284-5728 (Phone)

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