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Is it worth to hold bitcoin?

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  • Kim, S. Thomas

Abstract

This study examines if holding Bitcoin provides any benefit other than potential price appreciation. An estimation using the convenience yield term in the Cost-of-Carry model shows that the Bitcoin spot contract has a 5.4% premium compared to the futures contract, indicating a holding benefit. Short-selling restrictions in Bitcoin spot markets and voting rights are the sources of the premium. The short-selling restrictions make spot prices be downward sticky. The value of voting rights becomes more observable whenever a ballot is likely. When an important proposal is made to the Bitcoin network, the holding benefit increases by an additional 5.6%.

Suggested Citation

  • Kim, S. Thomas, 2022. "Is it worth to hold bitcoin?," Finance Research Letters, Elsevier, vol. 44(C).
    • Handle: RePEc:eee:finlet:v:44:y:2022:i:c:s1544612321001719
    DOI: 10.1016/j.frl.2021.102090
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    References listed on IDEAS

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    More about this item

    Keywords

    Bitcoin; Cryptocurrency; Bitcoin futures; Convenience yield; Holding benefit; Bitcoin valuation;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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