Digital currencies are a critical part of the digitization process. Along with gaining momentum with investors, digital currencies are being prominently covered by the media. Bitcoin, in particular, has reached multiple peaks within the previous few years while showing a continuous upward trend in value. The research conducted in this paper aims to uncover the major influencers of the value of bitcoin.
An approach using micro economic and macroeconomic models is used to categorize bitcoin as commodity or currency. Furthermore, five major digital currencies are also analyzed for correlation with the value of bitcoin and analysis of volatility in the exchange rates.
Based on the evaluation criteria, it is found that bitcoin can be classified as commodity more than currency due to high influence of supply and demand rather than macroeconomic factors. Also, it can be concluded that the price of bitcoin is highly correlated with the digital currency Monero while the other currencies analyzed show a small to medium correlation based on the Pearson correlation coefficient.
The paper also analyzes major changes in the historical timeline of bitcoin by the way of qualitative analysis of major events that may have caused volatility. In conclusion, a future outlook is provided which outlines upcoming changes per the author's opinion.
Table of Contents
- Acknowledgements
- 1 Introduction
- 1.1 Bitcoin
- 2 Research Aim
- 3 Literature Review
- 4 Methodology
- 4.1 Microeconomic
- 4.1.1 Supply
- 4.1.2 Demand
- 4.2 Macroeconomic
- 4.2.1 Political
- 4.2.2 Economic
- 4.2.3 Social
- 4.2.4 Technological
- 4.3 Correlation
- 4.4 Timeline of Major Events and Price of Bitcoin
- 4.5 Problems with Bitcoin
- 4.1 Microeconomic
- 5 Results
- 5.1 Microeconomic Analysis
- 5.2 Macroeconomic Analysis
- 5.3 Correlation Analysis
- 5.4 Volatility Analysis
Objectives and Key Themes
This research paper aims to investigate the key factors influencing the value of Bitcoin. The study uses microeconomic and macroeconomic models to categorize Bitcoin as a commodity or currency. It also analyzes correlations between Bitcoin and other digital currencies, examining their exchange rate volatility. The paper further explores the historical timeline of Bitcoin through a qualitative analysis of major events that may have caused volatility.
- Influence of microeconomic and macroeconomic factors on Bitcoin value
- Categorization of Bitcoin as commodity or currency
- Correlation analysis of Bitcoin with other digital currencies
- Volatility analysis of Bitcoin exchange rates
- Qualitative analysis of historical events impacting Bitcoin price
Chapter Summaries
The introduction provides context for the research by discussing the rise of digital currencies and their impact on the financial industry. It highlights the importance of understanding the characteristics of decentralized, unregulated currencies. The literature review explores existing research on the impact of the internet on money, the development of digital currencies, and the attention given to these topics by various stakeholders. The methodology section outlines the approach taken in the research, including microeconomic and macroeconomic models, correlation analysis, and the timeline of major events.
Keywords
The research focuses on the value of Bitcoin, exploring its categorization as a commodity or currency, its correlation with other digital currencies, and the volatility of its exchange rates. Key concepts include digital currency, cryptocurrency, microeconomic and macroeconomic factors, supply and demand, inflation, Bitcoin, Litecoin, Ethereum, Monero, Dash, Ripple, correlation, and volatility.
- Quote paper
- Alisha Dhiri (Author), 2017, Influences on the Price of Bitcoin, Munich, GRIN Verlag, https://www.grin.com/document/432078
