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The Relationship Between the Popularity of Cryptocurrencies and their Prices, Returns and Trading Volumes: A Structural Break and Comparative Analysis

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  • Mustafa ÖZYEŞİL

    (Istanbul Aydın University, Anadolu BIL Vocational School, Department of Business Administration, Istanbul, Turkey)

Abstract

In this study, the relationship between the popularity of cryptocurrencies and their price, return and trading volumes are examined through time series analysis. The popularity variable is determined according the frequency of cryptocurrencies being searched on the internet. Stationarity of series is examined by Vogelsang and Perron (1998) structural breaks ADF unit root test. According to the test results, all series are found to be stationary at level values. VAR analyses and impulse-response functions are performed to reveal dynamic interaction between the series. According to impulse - response test results, returns of BITCOIN decreased against a decreasing shock in the number searches on the internet and its price and trading volume followed a fluctuating course. In order to see the causality relationship between variables the Granger causality test is conducted. Regression analyses are performed using ordinary least squares (OLS) method through three different equations. According to the result of the regression analysis, an increase in the number of internet searches for cryptocurrencies was found to positively affect prices, returns and trading volumes of all cryptocurrencies. The highest impact on prices and trading volume is observed in BITCOIN, while the highest effect on returns is observed in LITECOIN. According to the findings, popularity can be considered an important determinant for price, returns and trading volumes of cryptocurrencies.

Suggested Citation

  • Mustafa ÖZYEŞİL, 2019. "The Relationship Between the Popularity of Cryptocurrencies and their Prices, Returns and Trading Volumes: A Structural Break and Comparative Analysis," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 69(2), pages 133-157, December.
    • Handle: RePEc:ist:journl:v:69:y:2019:i:2:p:133-157
    DOI: 10.26650/ISTJECON2019-0017
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    References listed on IDEAS

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    1. Vogelsang, Timothy J & Perron, Pierre, 1998. "Additional Tests for a Unit Root Allowing for a Break in the Trend Function at an Unknown Time," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 1073-1100, November.
    2. Rainer Böhme & Nicolas Christin & Benjamin Edelman & Tyler Moore, 2015. "Bitcoin: Economics, Technology, and Governance," Journal of Economic Perspectives, American Economic Association, vol. 29(2), pages 213-238, Spring.
    3. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
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    More about this item

    Keywords

    Crypto currencies; popularity; structural break analysis; var analysis;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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