Abstract
The trading volume of Bitcoin has increased immensely since its conception. Bitcoin is a cryptocurrency, it is not a legal currency but rather a private monetary system that manages by itself and does not depend on governments or central banks. It is an autonomous currency system that is not liable to any governing body. Some fear that the increase of Bitcoin usage, as it is quite different from traditional currencies and is free from control or regulations by monetary authorities. Although its popularity has grown worldwide, fluctuations of the prices are sometimes erratic. Hence, such large and sudden movements would dampen the sound development of Bitcoin. This paper examines how the volatile price of Bitcoin changes empirically. The empirical results show that there is a difference between short-term volatility and long-term volatility. Traders should see not only the short-term movements in volatile Bitcoin pricing but also long-term developments.
Highlights
Bitcoin, created in 2008, is the most innovative digital currency (Zhu, Dickinson, & Li, 2017)
Some fear that the increase of Bitcoin usage, as it is quite different from traditional currencies and is free from control or regulations by monetary authorities
The empirical results show that there is a difference between short-term volatility and long-term volatility
Summary
Bitcoin, created in 2008, is the most innovative digital currency (Zhu, Dickinson, & Li, 2017). Dyhrberg (2016) indicated that Bitcoin provides a hedge instrument for performing financial transactions. Yermack (2013) indicated that Bitcoin appears to be used more as a speculative financial instrument than as a typical currency transaction. Gronwald (2014) showed that Bitcoin prices are characterized by large price fluctuations such as those found in newly emerging markets. There are few studies that examine the price volatility of Bitcoin. This study is not directly related with Bitcoin, but there are some possibilities that such kinds of anomalies should be taken into account. In a different recent study, Urquhart (2016) indicated that the Bitcoin market had been inefficient until recently. Li and VVang (2017) indicated that Bitcoin prices adjust to economic fundamentals and market conditions.
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