Bitcoin: Speculative asset or innovative technology?

Lee, AD; Li, M; Zheng, H

Bitcoin: Speculative asset or innovative technology?

Lee, AD Li, M Zheng, H

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Publisher:: Elsevier BV
Publication Type:: Journal Article
Citation:: Journal of International Financial Markets, Institutions and Money, 2020, 67, pp. 101209-101209
Issue Date:: 2020-07-01

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Field	Value	Language
dc.contributor.author	Lee, AD
dc.contributor.author	Li, M
dc.contributor.author	Zheng, H
dc.date.accessioned	2021-06-18T02:14:13Z
dc.date.available	2021-06-18T02:14:13Z
dc.date.issued	2020-07-01
dc.identifier.citation	Journal of International Financial Markets, Institutions and Money, 2020, 67, pp. 101209-101209
dc.identifier.issn	1042-4431
dc.identifier.uri	http://hdl.handle.net/10453/149614
dc.description.abstract	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.
dc.language	en
dc.publisher	Elsevier BV
dc.relation.ispartof	Journal of International Financial Markets, Institutions and Money
dc.relation.isbasedon	10.1016/j.intfin.2020.101209
dc.rights	info:eu-repo/semantics/closedAccess
dc.subject	1402 Applied Economics, 1502 Banking, Finance and Investment
dc.subject.classification	Finance
dc.title	Bitcoin: Speculative asset or innovative technology?
dc.type	Journal Article
utslib.citation.volume	67
utslib.for	1402 Applied Economics
utslib.for	1502 Banking, Finance and Investment
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Finance Discipline
pubs.organisational-group	/University of Technology Sydney/Strength - QFRC - Quantitative Finance Research Centre
utslib.copyright.status	closed_access	*
dc.date.updated	2021-06-18T02:14:12Z
pubs.publication-status	Published
pubs.volume	67

Abstract:

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.

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http://hdl.handle.net/10453/149614