Equilibrium Bitcoin Pricing
In this working paper from Bruno Biais ( HEC Paris), Christophe Bisière, Matthieu Bouvard, Catherine Casamatta and Albert J. Menkveld (EconPol Europe, Toulouse School of Economics, Universite Toulouse Capitole [TSM-Research]), the authors offer an equilibrium model of cryptocurrency pricing and confront it to new data on bitcoin transactional benefi ts and costs. The model emphasises that the fundamental value of the cryptocurrency is the stream of net transactional benefi ts it will provide, which depend on its future prices. The link between future and present prices implies that returns can exhibit large volatility, unrelated to fundamentals. They construct an index measuring the ease with which bitcoins can be used to purchase goods and services and measure costs incurred by bitcoin owners. Consistent with the model, estimated transactional net benefi ts explain a statistically signi cant fraction of bitcoin returns.
We offer an equilibrium model of cryptocurrency pricing and confront it to new data on bitcoin transactional bene fits and costs. The model emphasises that the fundamental value of the cryptocurrency is the stream of net transactional benefi ts it will provide, which depend on its future prices. The link between future and present prices implies that returns can exhibit large volatility, unrelated to fundamentals. We construct an index measuring the ease with which bitcoins can be used to purchase goods and services, and we also measure costs incurred by bitcoin owners. Consistent with the model, estimated transactional net bene fits explain a statistically signi cant fraction of bitcoin returns.
Bruno Biais, Christophe Bisière, Matthieu Bouvard, Catherine Casamatta, Albert J. Menkveld: "Equilibrium Bitcoin Pricing", EconPol Working Paper 45, July 2020