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      How Blockchain Network Factors and Market Forces Determine Bitcoin Returns

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      research-article
      This is not the latest version for this article. If you want to read the latest version, click here.
        1 ,
      ScienceOpen Preprints
      ScienceOpen
      Bitcoin, Bitcoin Price, Bitcoin Network Factor, Bitcoin Market Forces, VAR/VECM
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            Revision notes

            1. I now include one recommendation in the abstract as suggested by the second reviewer. Please refer to the last sentence of the abstract.

            2. I added another paragraph (i.e., paragraph 7) in the introduction to explicitly capture the main contribution.

            3. The suggestions for future research is now included in the conclusions (see paragraph 2 of the conclusions).

            4. All the references are checked, and they now follow a uniform style

            5. The discussion was also made more explicit to reflect how it relates to existing evidence

            6. The paper was sent for professional English proofreading.

            Abstract

            The creation of distributed ledgers technologies spirals secured peer-to-peer interactions that pave way for the invention of Bitcoin. Since its invention, the price of Bitcoin has exhibited excessive volatility and has attracted increasing attentions. The study considers the isolated influence of network activities, mining (technology) and market information as fundamental drivers of bitcoin prices. A long-term equilibrium and short-term dynamic relationship is confirmed amongst endogenous system’s variables in the VEC Model. This suggests that any deviation from the equilibrium dynamics due to perturbations of market forces (bitcoin supply and trade volume), mining information (network difficulty, Hashrate and transaction fees) as well as the network activity (confirmed payments and users adoptions) would be minimised. The model explains that the cointegration relationship has a reverse adjustment effect on bitcoin return. This justifies why Bitcoin price, and by implication the return, continues to experience different massive run-up, spiky protrusions, resistance, reversals, strong supports and consolidations in the short. Amongst others, the study recommends that there should be increase in regulation to curb excessive fluctuations that can cause significant loss to the returns and discourage digital investors.

            Content

            Author and article information

            Journal
            ScienceOpen Preprints
            ScienceOpen
            25 December 2022
            Affiliations
            [1 ] Department of Accounting Science, Walter Sisulu University, Mthatha, Eastern Cape, South Africa
            Author notes
            Author information
            https://orcid.org/0000-0002-1929-3291
            Article
            10.14293/S2199-1006.1.SOR-.PPASACK.v2
            b63fdf72-b848-40ba-8c65-637c1d8ecec8

            This work has been published open access under Creative Commons Attribution License CC BY 4.0 , which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. Conditions, terms of use and publishing policy can be found at www.scienceopen.com .

            History
            : 3 November 2022
            Categories

            The datasets generated during and/or analysed during the current study are available from the corresponding author on reasonable request.
            Statistics,Economics
            Bitcoin, Bitcoin Price, Bitcoin Network Factor, Bitcoin Market Forces, VAR/VECM

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