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Speculative bubble tendencies in time series of Bitcoin market prices

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  • Michael Demmler
  • Amilcar Orlian Fernández Domínguez

Abstract

This article explores the concepts of cryptocurrencies and speculative bubbles, as Bitcoin’s price behaviour shares characteristics with speculative bubbles that have occurred in recent years. Using a quantitative research design, the study examines daily market prices for the period between 2013 and 2019. Statistical moments, return stationarity, TARCH-type model estimations and Supremum Augmented Dickey-Fuller and Generalised Supremum Augmented Dickey-Fuller tests are analysed. We find evidence for multiple speculative bubble tendencies in Bitcoin prices caused by speculation, which reached their maximum at the end of 2017. Our results are in line with recent studies, which characterise Bitcoin as both highly speculative and vulnerable to financial bubbles. ****** Este artículo relaciona los conceptos de criptomonedas y burbujas financieras, dado que los precios de Bitcoin presentan características típicas de burbujas especulativas en los últimos anos. La investigación cuantitativa considera precios diarios de 2013 a 2019, y analiza los momentos estadísticos y la estacionariedad de los rendimientos, la estimación de modelos tipo TARCH, y las pruebas Dickey-Fuller Aumentada Superior y Dickey-Fuller Aumentada Superior Generalizada. Encontramos evidencia de múltiples tendencias de burbujas financieras debidas a procesos especulativos, con un máximo a finales de 2017. Nuestros resultados confirman estudios recientes que caracterizan a BTC como altamente especulativo y vulnerable a las burbujas financieras.

Suggested Citation

  • Michael Demmler & Amilcar Orlian Fernández Domínguez, 2022. "Speculative bubble tendencies in time series of Bitcoin market prices," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, vol. 41(86), pages 159-183, May.
    • Handle: RePEc:col:000093:020203
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    References listed on IDEAS

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    1. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    2. Arianna Agosto & Alessia Cafferata, 2020. "Financial Bubbles: A Study of Co-Explosivity in the Cryptocurrency Market," Risks, MDPI, vol. 8(2), pages 1-14, April.
    3. James Angel & Douglas McCabe, 2009. "The Ethics of Speculation," Journal of Business Ethics, Springer, vol. 90(3), pages 277-286, December.
    4. Fama, Eugene F, 1991. "Efficient Capital Markets: II," Journal of Finance, American Finance Association, vol. 46(5), pages 1575-1617, December.
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    Cited by:

    1. Ben Osman, Myriam & Galariotis, Emilios & Guesmi, Khaled & Hamdi, Haykel & Naoui, Kamel, 2024. "Are markets sentiment driving the price bubbles in the virtual?," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 272-285.

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    More about this item

    Keywords

    Cryptocurrency; asset price bubble; speculation; time series analysis.;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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