Bitcoin valuation: Transactional demand versus speculative bubble

Maarten van Oordt

Bitcoin valuation: Transactional demand versus speculative bubble

Research output: Web publication or Non-textual form › Web publication or Website › Professional

Abstract

The recent surge in the price of Bitcoin has reignited debates about a cryptocurrency bubble, many of them based on intuition. This column takes a formal approach to the beliefs underlying both sides of the debate by introducing a model that builds on the classical framework for rational bubbles. If the price of a cryptocurrency can be justified from transactional demand, it may be a sound investment. However, if future investment inflows are needed to explain the price, that indicates a bubble, with payoffs resembling a Ponzi scheme.

Original language	English
Publication status	Published - 7 Dec 2024

Keywords

Bitcoin
Cryptocurrency
Exchange rates
Bubbles

Access to Document

https://cepr.org/voxeu/columns/bitcoin-valuation-transactional-demand-versus-speculative-bubble

Persistent URL (handle)

Persistent link

1 Working paper

On bubbles in cryptocurrency prices
van Oordt, M., 2024, (Tinbergen Institute Discussion Paper; no. 2024-050/IV).
Research output: Working paper / Preprint › Working paper › Professional

Cite this

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KW - Exchange rates

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Bitcoin valuation: Transactional demand versus speculative bubble

Abstract

Keywords

Access to Document

Persistent URL (handle)

Research output

On bubbles in cryptocurrency prices

Cite this