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Exploring the relationship between Bitcoin price and network’s hashrate within endogenous system

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  • Kubal, Jan
  • Kristoufek, Ladislav

Abstract

Bitcoin pricing mechanism is a complex system of interactions between factors that are not standard for traditional financial assets. Its understanding is essential for assessing specific topics, most prominently the interaction between Bitcoin price and network’s hashrate as it directly translates into its power demand and consumption and thus also environmental implications. We examine an intertwined system of equations, controlling for various statistical caveats connected to such system, providing a coherent picture of the system dynamics and thus delivering the most rigorous and complex approach in explaining the pricing dynamics of the Bitcoin system up to date. We shown that the whole system is very well structured and delivers economically and logically sound results, pointing at the network security narrative in the Bitcoin price–hashrate nexus.

Suggested Citation

  • Kubal, Jan & Kristoufek, Ladislav, 2022. "Exploring the relationship between Bitcoin price and network’s hashrate within endogenous system," International Review of Financial Analysis, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:finana:v:84:y:2022:i:c:s1057521922003258
    DOI: 10.1016/j.irfa.2022.102375
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    References listed on IDEAS

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    Cited by:

    1. Podhorsky, Andrea, 2023. "Taxing bitcoin: Incentivizing the difficulty adjustment mechanism to reduce electricity usage," International Review of Financial Analysis, Elsevier, vol. 86(C).
    2. Ma, Rui & Xie, Xiao qin & Liu, Bin & Zhou, Fengjiao & Samsurijan, Mohamad Shaharudin bin, 2023. "Transmission to green economic development and the dependence on natural resources in China," Resources Policy, Elsevier, vol. 86(PB).
    3. Jiri Kukacka & Ladislav Kristoufek, 2023. "Fundamental and speculative components of the cryptocurrency pricing dynamics," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-23, December.
    4. Kim, Daehan & Ryu, Doojin & Webb, Robert I., 2023. "Determination of equilibrium transaction fees in the Bitcoin network: A rank-order contest," International Review of Financial Analysis, Elsevier, vol. 86(C).

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