BTC price volatility: Fundamentals versus information
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Date
2021
Journal Title
Journal ISSN
Volume Title
Publisher
Cogent Business & Management
Abstract
This paper offers a plausible response to “what explains the sporadic
volatility in the price of Bitcoin?” We hypothesized that market “fundamentals” and
“information demands” are key drivers of Bitcoin’s unpredictable price fluctuation.
We adopt the transfer-function [Autoregressive Distributed Lag, ARDL] model and
its Bounds testing approach to verify how the volatility of the price of Bitcoin
responds to its transaction volume, cryptocurrency market capitalisation, world
market equity index and Google search. We found the existence of long-run coin
tegration relation and observed that all the variables except the equity index
positively explain the volatility of Bitcoin price. The result established evidence that
market fundamentals drive erratic swing in Bitcoin price than information.