FACTORS AFFECTING BITCOIN PRICE IN THE CRYPTOCURRENCY MARKET: AN EMPIRICAL STUDY

Tram Nguyen
Christopher de Bodisco
Ranjini Thaver
Stetson University

ABSTRACT

This study examines the relationships between Bitcoin and some major cryptocurrencies
to better understand the effects of different market factors on their price formation. Our results
show that Bitcoin’s price is driven by both transactional demand, such as supply of Bitcoin or size
of the Bitcoin economy, and speculative demand, namely media attention or price of another
cryptocurrency. Bitcoin’s dominant player role may be jeopardized in the decentralized payment
system market. In addition, since late December 2017, speculation for Bitcoin has been
decreasing. This can open an opportunity for Bitcoin’s transactional demand to grow faster.
Keywords: Behavioral cryptocurrency market, Bitcoin’s dominance, speculative demand, transactional demand,
Bitcoin economy