Bitcoin: Speculative asset or innovative technology?
- Elsevier BV
- Publication Type:
- Journal Article
- Journal of International Financial Markets, Institutions and Money, 2020, 67, pp. 101209-101209
- Issue Date:
Copyright Clearance Process
- Recently Added
- In Progress
- Closed Access
This item is closed access and not available.
We unite investment by speculators and tech-savvy investors with a heterogeneous agent model. While speculators seek to profit from extrapolating the price trends, tech-savvy investors trade based on the prospective value of Bitcoin, which is a function of factors that capture the market demand and technical supply of Bitcoin. Estimating the structural model, we find the coexistence of speculators and tech-savvy investors in the Bitcoin market. We further show that, regardless of the market states, tech-savvy investors consistently buy (sell) Bitcoin when its price goes below (above) the prospective value. However, speculators follow a momentum trading strategy in the high-market-volatility regime and switch to a contrarian strategy in the low-market-volatility regime. Our finding suggests that a significant fraction of tech-savvy investors value the potential of Bitcoin as an innovative technology. Incorporating heterogeneous investors yields better in-sample estimation efficiency and out-of-sample forecasting precision than models that consider only speculators or tech-savvy investors.
Please use this identifier to cite or link to this item: