How to price a Digital Currency? Empirical Insights on the Influence of Media Coverage on the Bitcoin Bubble


How to price a Digital Currency? Empirical Insights on the Influence of Media Coverage on the Bitcoin Bubble

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Florian Glaser, Martin Haferkorn, Moritz Christian Weber, Kai Zimmermann
BIT 1/2014
12 Seiten
Digital currencies are gaining more and more attention against the backdrop of recent events triggered by the ongoing economic crisis. While digital currencies face increasing popularity, the currencies‘ prices are free floating and subject to high volatility as a result of lacking fundamental valuation methods. On the basis of an overview over the most prominent currency – Bitcoin – and an economic literature review we propose a model that incorporates the basic components of the current price discovery process of a digital currency‘s exchange rate. Relying on an empirical validation we further show that, in the case of Bitcoin, price volatility is significantly influenced by the media coverage and positive sentiment.
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