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Bitcoin and web search query dynamics: is the price driving the hype or is the hype driving the price?

Author

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  • Bernd Süssmuth

Abstract

Using a battery of timely multivariate time series techniques I study the Bitcoin cryptocurrency price series and web search queries with regard to their mutual predictability, Granger-causality and cause-effect delay structure. The Bitcoin is at first treated as a general currency, then as a generic asset. Google queries, although cointegrated, are found to be not helpful in predicting the USD exchange rate of Bitcoin as the speculative bubble in the latter antedates explosive behavior in the former. Chinese Baidu engine queries and compounded Baidu-Google queries predict Bitcoin price dynamics at relatively high frequencies ranging from two to five months. In the other direction, causality runs from the cryptocurrency price to queries statistics across nearly all frequencies. In both directions, the reaction time computed from a phase delay measure for the relevant frequency bands with significant causality ranges from slightly more than one month to about four months.

Suggested Citation

  • Bernd Süssmuth, 2019. "Bitcoin and web search query dynamics: is the price driving the hype or is the hype driving the price?," CESifo Working Paper Series 7675, CESifo.
    • Handle: RePEc:ces:ceswps:_7675
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    More about this item

    Keywords

    bitcoin; bubbles; frequency domain; causality;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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