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How explosive are cryptocurrency prices?

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  • Gronwald, Marc

Abstract

This paper revisits the issue of price explosiveness in cryptocurrency markets by analysing the prices of Bitcoin, XRP, Ether, and Litecoin not only expressed in US Dollars, but also the price of the latter three expressed in Bitcoin. There is strong evidence of explosive periods in cryptocurrency prices expressed in US Dollars, but also when XRP and Ether are expressed in Bitcoin. Whether or not these explosive periods can be interpreted as cryptocurrency bubbles requires a sufficient understanding of the fundamental value of cryptocurrencies. As this is currently insufficient, the term bubble should be used with more caution.

Suggested Citation

  • Gronwald, Marc, 2021. "How explosive are cryptocurrency prices?," Finance Research Letters, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:finlet:v:38:y:2021:i:c:s1544612320303913
    DOI: 10.1016/j.frl.2020.101603
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    References listed on IDEAS

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    Cited by:

    1. Chhatwani, Malvika & Parija, Arpit Kumar, 2023. "Who invests in cryptocurrency? The role of overconfidence among American investors," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 107(C).
    2. De Pace, Pierangelo & Rao, Jayant, 2023. "Comovement and instability in cryptocurrency markets," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 173-200.
    3. Hachmi Ben Ameur & Zied Ftiti & Waël Louhichi, 2024. "Interconnectedness of cryptocurrency markets: an intraday analysis of volatility spillovers based on realized volatility decomposition," Annals of Operations Research, Springer, vol. 341(2), pages 757-779, October.
    4. Emily J. Whitehouse & David I. Harvey & Stephen J. Leybourne, 2023. "Real‐Time Monitoring of Bubbles and Crashes," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 85(3), pages 482-513, June.
    5. Marc Gronwald, 2023. "Explosive Temperatures," CESifo Working Paper Series 10680, CESifo.
    6. Eray Gemici & Muslum Polat & Remzi Gök & Muhammad Asif Khan & Mohammed Arshad Khan & Yunus Kilic, 2023. "Do Bubbles in the Bitcoin Market Impact Stock Markets? Evidence From 10 Major Stock Markets," SAGE Open, , vol. 13(2), pages 21582440231, June.
    7. Yuzhi Cai & Thanaset Chevapatrakul & Danilo V. Mascia, 2021. "How is price explosivity triggered in the cryptocurrency markets?," Annals of Operations Research, Springer, vol. 307(1), pages 37-51, December.
    8. Shahzad, Syed Jawad Hussain & Anas, Muhammad & Bouri, Elie, 2022. "Price explosiveness in cryptocurrencies and Elon Musk's tweets," Finance Research Letters, Elsevier, vol. 47(PB).
    9. Gustavo Iamin, 2024. "Are crypto-investors overconfident? The role of risk propensity and demographics. Evidence from Brazil and Portugal," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 26(1), pages 147-173, November.
    10. Bellón, Carlos & Figuerola-Ferretti, Isabel, 2022. "Bubbles in Ethereum," Finance Research Letters, Elsevier, vol. 46(PB).
    11. Almeida, José & Gonçalves, Tiago Cruz, 2023. "A systematic literature review of investor behavior in the cryptocurrency markets," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    12. Chowdhury, Md Iftekhar Hasan & Hasan, Mudassar & Bouri, Elie & Tang, Yayan, 2024. "Emotional spillovers in the cryptocurrency market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 41(C).
    13. Podhorsky, Andrea, 2024. "Bursting the bitcoin bubble: Do market prices reflect fundamental bitcoin value?," International Review of Financial Analysis, Elsevier, vol. 93(C).
    14. Agosto, Arianna & Cerchiello, Paola & Pagnottoni, Paolo, 2022. "Sentiment, Google queries and explosivity in the cryptocurrency market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 605(C).

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    More about this item

    Keywords

    Cryptocurrencies; Bubbles; Explosiveness; Fundamental value; Intrinsic value; Fiat money;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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