Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/196905 
Year of Publication: 
2019
Citation: 
[Journal:] Economics: The Open-Access, Open-Assessment E-Journal [ISSN:] 1864-6042 [Volume:] 13 [Issue:] 2019-29 [Publisher:] Kiel Institute for the World Economy (IfW) [Place:] Kiel [Year:] 2019 [Pages:] 1-26
Publisher: 
Kiel Institute for the World Economy (IfW), Kiel
Abstract: 
In this paper the authors investigate the statistical properties of some cryptocurrencies by using three layers of analysis: alpha-stable distributions, Metcalfe's law and the bubble behaviour through the LPPL modelling. The results show, in the medium to long-run, the validity of Metcalfe's law (the value of a network is proportional to the square of the number of connected users of the system) for the evaluation of cryptocurrencies; however, in the short-run, the validity of Metcalfe's law for Bitcoin is questionable. According to the bidirectional causality between the price and the network size, the expected price increase is a driver for more investors to join the Bitcoin network, which may lead in the end to a super-exponential price growth, possibly due to a herding behaviour of investors. The authors then used LPPL models to capture the behaviour of cryptocurrencies exchange rates during an endogenous bubble and to predict the most probable time of the regime switching. The main conclusion of this paper is that Metcalfe's law may be valid in the long-run, however in the short-run, on various data regimes, its validity is highly debatable.
Subjects: 
cryptocurrency
Bitcoin
CRIX
log-periodic power law
Metcalfe's law
stable distribution
herding
JEL: 
C22
C32
C51
C53
C58
E41
E42
E47
E51
G1
G17
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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