Bitcoin: Medium of Exchange or Speculative Assets?

By Dirk G. Baur, K. Hong, Adrian Lee. 2017

1,227 citations recorded by the source corpus.

Bitcoin is defined as digital money within a decentralized peer-to-peer payment network. It is a hybrid between fiat currency and commodity currency without intrinsic value and independent of any government or monetary authority. This paper analyses the question of whether Bitcoin is a medium of exchange or an asset and more specifically, what is its current usage and what usage will prevail in the future given its characteristics. We analyse the statistical properties of Bitcoin and find that it is uncorrelated with traditional asset classes such as stocks, bonds and commodities both in normal times and in periods of financial turmoil. The analysis of transaction data of Bitcoin accounts shows that Bitcoins are mainly used as a speculative investment and not as an alternative currency and medium of exchange.

Subfields: Economics and Econometrics, Finance, Information Systems

View Paper: https://www.semanticscholar.org/paper/9d17865be2471788f85d240774d8d1289387880f

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Citations in the corpus

Does Sentiment Impact Cryptocurrency? (2021, background): “Baur, Hong, and Lee (2018) found that Bitcoin is held for investment purposes, and it offers better diversification benefits compared to other asset classes both in normal times and tumultuous times.”
The predictive power of public Twitter sentiment for forecasting cryptocurrency prices (2020, background): “A more recent study by Baur et al. (2018) nds that Bitcoin is a speculative asset and not an alternative currency.”
The economic value of Bitcoin: A portfolio analysis of currencies, gold, oil and stocks (2019, neutral): “We select more than one assets in each asset class portfolio, even in cases they are highly correlated, to reduce the 5Employing a price index that blends trading prices of the top Bitcoin exchanges is a standard practice in literature (e.g., see Dyhrberg, 2016; Katsiampa, 2017; Baur et al., 2018).”
Searching for safe-haven assets during the COVID-19 pandemic (2020, neutral): “Statistical analysis by Baur et al. (2018) suggests that bitcoin is uncorrelated with other financial assets.”
Cryptocurrency market contagion: Market uncertainty, market complexity, and dynamic portfolios (2019, background): “Bitcoin, which was the first currency of this technology to be invented, still remains the most popular digital currency; however, other alternatives such as Ethereum and Ripple are gaining pace, while in fact, during 2017, the market capitalization of all other digital currencies put together had e”