Working paper

Equilibrium Bitcoin Pricing

Bruno Biais, Christophe Bisière, Matthieu Bouvard, Catherine Casamatta, and Albert J. Menkveld

Abstract

We offer an overlapping generations equilibrium model of cryptocurrency pricing and confront it to new data on bitcoin transactional benefits and costs. The model emphasizes that the fundamental value of the cryptocurrency is the stream of net transactional benefits it will provide, which depend on its future prices. The link between future and present prices implies that returns can exhibit large volatility unrelated to fundamentals. We construct an index measuring the ease with which bitcoins can be used to purchase goods and services, and we also measure costs incurred by bitcoin owners. Consistent with the model, estimated transactional net benefits explain a statistically significant fraction of bitcoin returns.

Reference

Bruno Biais, Christophe Bisière, Matthieu Bouvard, Catherine Casamatta, and Albert J. Menkveld, Equilibrium Bitcoin Pricing, TSE Working Paper, n. 18-973, December 2018.

See also

Published in

TSE Working Paper, n. 18-973, December 2018