Abstract
This paper examines whether cryptocurrency bubbles are loud. We focus on the relation between bitcoin prices and trading volume. Using bitcoin data from Korea and the US, we document that the elevated trading volume and price volatility can explain the ‘Kimchi premium’. In particular, as the bitcoin bubble grows, the relationship between trading volume and premium becomes clearer. This is consistent with the speculative bubble literature, which shows that the size of a bubble is positively related to trading volume. Our findings imply that fundamental uncertainty generates more dispersion in heterogeneous beliefs among investors and leads to high trading and to speculative bubbles.
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