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Short-run and long-run determinants of bitcoin returns: transnational evidence

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  • Priti Dubey

Abstract

Purpose - Bitcoin has emerged as a phenomenal asset earning abnormal profits. However, the factors with predictability power over its price are not widely studied. Therefore, this study aims to explore the factors that determine bitcoin prices. The analysis explores the determinants belonging to four categories – macro economic, financial, technical and fundamental factors. Design/methodology/approach - The study employs random effects regression on the panel data of five countries. Then Granger causality test is applied on the time series of all the variables. Lastly, diagnostic tests are conducted to confirm the findings to be robust and reliable. Findings - The findings suggest that oil price, bitcoin supply, trading volume and market capitalization significantly impact the price of bitcoin in the long run. In short run, bitcoin returns are only caused by oil price and market capitalization. Interestingly, bitcoin returns influence its attractiveness to investors, market capitalization, S&P 500 returns and trading volume, in the short run. Practical implications - The technical analysis is found to be redundant in the short run. In the long run, technical as well as fundamental analysis are useful. The bitcoin is found to be a good diversification tool as it has no linkages with the stock markets and gold market. It is also an inflationary hedger owing its limited supply. Originality/value - The studies on cryptocurrency market have not conducted the analysis across countries. This study captures the cross-sectional effects along with time effects. The study also includes 17 variables belonging to four categories.

Suggested Citation

  • Priti Dubey, 2022. "Short-run and long-run determinants of bitcoin returns: transnational evidence," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 14(4), pages 533-544, June.
    • Handle: RePEc:eme:rbfpps:rbf-02-2022-0040
    DOI: 10.1108/RBF-02-2022-0040
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    Citations

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    Cited by:

    1. Arun Narayanasamy & Humnath Panta & Rohit Agarwal, 2023. "Relations among Bitcoin Futures, Bitcoin Spot, Investor Attention, and Sentiment," JRFM, MDPI, vol. 16(11), pages 1-24, November.
    2. Wang, Qingyu & Huang, Qing & Wu, Xiangfang & Tan, Jin & Sun, Panxu, 2023. "Categorical uncertainty in policy and bitcoin volatility," Finance Research Letters, Elsevier, vol. 58(PC).

    More about this item

    Keywords

    Bitcoin; Cryptocurrencies; Financial markets; Pricing theory; Panel analysis; G12; G15; G23; O16;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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