Bitcoin returns and transaction activity

By Dimitrios Koutmos. Economics Letters, 2018

135 citations recorded by the source corpus.

Abstract This paper examines the empirical linkages between Bitcoin returns and transaction activity. Extant literature shows Bitcoin prices may be detached from economic fundamentals. The question that remains however is whether its price movements are linked with its transaction activity - a critical element of its growing market microstructure. Using number of Bitcoin transactions and unique addresses, respectively, to proxy for transaction activity, it is shown that a one standard deviation shock to transaction activity leads to just over a 0.30% gain in returns on the third day following the shock. By the sixth day, there is a reversal in price behavior and any such gains are expunged. When comparing the bidirectional linkages between returns and transaction activity, it is shown here that the contribution of return shocks to transaction activity is quantitatively larger in magnitude.

Subfields: Economics and Econometrics, Information Systems

View Paper: https://www.semanticscholar.org/paper/bb406d2e6ed3d8e5b3fd4a3a669367e53da72e8c

Citations in the corpus

• An empirical investigation of volatility dynamics in the cryptocurrency market (2019, unknown): “Furthermore, Koutmos (2018) found evidence of bidirectional linkages between Bitcoin price returns and transaction activity, with the impact of return shocks on transaction activity being larger in magnitude.”
• Optimal vs naïve diversification in cryptocurrencies (2018, unknown): “…benefits of Bitcoin (Bouri et al 2017a; Corbet et al 2018a), the unique features of cryptocurrencies (Gkillas and Katsiampa 2018; Phillip et al 2018), the relationship between transaction activity and Bitcoin returns (Koutmos 2018) and price clustering within Bitcoin prices (Urquhart 2017).”