Bitcoin price and its marginal cost of production: support for a fundamental value

By Adam S. Hayes. Applied Economics Letters, 2018

113 citations recorded by the source corpus.

ABSTRACT This study back-tests a marginal cost of production model proposed to value the digital currency Bitcoin. Results from both conventional regression and vector autoregression (VAR) models show that the marginal cost of production plays an important role in explaining Bitcoin prices, challenging recent allegations that Bitcoins are essentially worthless. Even with markets pricing Bitcoin in the thousands of dollars each, the valuation model seems robust. The data show that a price bubble that began in the Fall of 2017 resolved itself in early 2018, converging with the marginal cost model. This suggests that while bubbles may appear in the Bitcoin market, prices will tend to this bound and not collapse to zero.

Subfields: Economics and Econometrics, Information Systems

View Paper: https://www.semanticscholar.org/paper/d4a4785d6f75f0b83a5b3105e49eb605285d9d80

Citations in the corpus

• A systematic review of the bubble dynamics of cryptocurrency prices (2020, unknown): “Hayes [2019] found that the marginal cost of production plays an important role in explaining Bitcoin prices, while Van Vliet [2018] investigated the role that Metcalfe’s Law played in the valuation of Bitcoin.”