Abstract
BackgroundBitcoin, the most innovate digital currency as of now, created since 2008, even through experienced its ups and downs, still keeps drawing attentions to all parts of society. It relies on peer-to-peer network, achieved decentralization, anonymous and transparent. As the most representative digital currency, people curious to study how Bitcoin’ price changes in the past.MethodsIn this paper, we use monthly data from 2011 to 2016 to build a VEC model to exam how economic factors such as Custom price index, US dollar index, Dow jones industry average, Federal Funds Rate and gold price influence Bitcoin price.ResultFrom empirical analysis we find that all these variables do have a long-term influence. US dollar index is the biggest influence on Bitcoin price while gold price influence the least.ConclusionFrom our result, we conclude that for now Bitcoin can be treated as a speculative asset, however, it is far from being a proper credit currency.
Highlights
Bitcoin, the most innovate digital currency as of created since 2008, even through experienced its ups and downs, still keeps drawing attentions to all parts of society
We select our variables based on these results to test how financial assets’ price and macroeconomic influence on Bitcoin price, and since Bitcoin is constantly referring as digital gold, are these variables have the same effect on Bitcoin price as they did in gold price
The Vector Error Correction (VEC) can take into account any cointegrating relationships among the variables, which is why we choose this model in this study
Summary
The most innovate digital currency as of created since 2008, even through experienced its ups and downs, still keeps drawing attentions to all parts of society It relies on peer-to-peer network, achieved decentralization, anonymous and transparent. The most innovate digital currency as of created since 2008, even though experienced its ups and downs, still keeps drawing attentions to all parts of society. No need to say how Bitcoin price changed since 2011 when it first came to people’s attention This observation can lead to many questions worth to study on. Such as what influence Bitcoin price? What is the relationship between Bitcoin and other economy indicator? Is there any connection between Bitcoin price and stock market index? All these questions are remain unsolved
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