Fundamental and speculative components of the cryptocurrency pricing dynamics
Abstract The driving forces behind cryptoassets’ price dynamics are often perceived as being dominated by speculative factors and inherent bubble-bust episodes. Fundamental components are believed to have a weak, if any, role in the price-formation process. This study examines five cryptoassets with...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
SpringerOpen
2023-03-01
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| Series: | Financial Innovation |
| Subjects: | |
| Online Access: | https://doi.org/10.1186/s40854-023-00465-7 |
| _version_ | 1797863785808003072 |
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| author | Jiri Kukacka Ladislav Kristoufek |
| author_facet | Jiri Kukacka Ladislav Kristoufek |
| author_sort | Jiri Kukacka |
| collection | DOAJ |
| description | Abstract The driving forces behind cryptoassets’ price dynamics are often perceived as being dominated by speculative factors and inherent bubble-bust episodes. Fundamental components are believed to have a weak, if any, role in the price-formation process. This study examines five cryptoassets with different backgrounds, namely Bitcoin, Ethereum, Litecoin, XRP, and Dogecoin between 2016 and 2022. It utilizes the cusp catastrophe model to connect the fundamental and speculative drivers with possible price bifurcation characteristics of market collapse events. The findings show that the price and return dynamics of all the studied assets, except for Dogecoin, emerge from complex interactions between fundamental and speculative components, including episodes of price bifurcations. Bitcoin shows the strongest fundamentals, with on-chain activity and economic factors driving the fundamental part of the dynamics. Investor attention and off-chain activity drive the speculative component for all studied assets. Among the fundamental drivers, the analyzed cryptoassets present their coin-specific factors, which can be tracked to their protocol specifics and are economically sound. |
| first_indexed | 2024-04-09T22:41:12Z |
| format | Article |
| id | doaj.art-17659dd1664b434289770e1baf9de2b6 |
| institution | Directory Open Access Journal |
| issn | 2199-4730 |
| language | English |
| last_indexed | 2024-04-09T22:41:12Z |
| publishDate | 2023-03-01 |
| publisher | SpringerOpen |
| record_format | Article |
| series | Financial Innovation |
| spelling | doaj.art-17659dd1664b434289770e1baf9de2b62023-03-22T12:06:45ZengSpringerOpenFinancial Innovation2199-47302023-03-019112310.1186/s40854-023-00465-7Fundamental and speculative components of the cryptocurrency pricing dynamicsJiri Kukacka0Ladislav Kristoufek1Institute of Information Theory and Automation, Czech Academy of SciencesInstitute of Information Theory and Automation, Czech Academy of SciencesAbstract The driving forces behind cryptoassets’ price dynamics are often perceived as being dominated by speculative factors and inherent bubble-bust episodes. Fundamental components are believed to have a weak, if any, role in the price-formation process. This study examines five cryptoassets with different backgrounds, namely Bitcoin, Ethereum, Litecoin, XRP, and Dogecoin between 2016 and 2022. It utilizes the cusp catastrophe model to connect the fundamental and speculative drivers with possible price bifurcation characteristics of market collapse events. The findings show that the price and return dynamics of all the studied assets, except for Dogecoin, emerge from complex interactions between fundamental and speculative components, including episodes of price bifurcations. Bitcoin shows the strongest fundamentals, with on-chain activity and economic factors driving the fundamental part of the dynamics. Investor attention and off-chain activity drive the speculative component for all studied assets. Among the fundamental drivers, the analyzed cryptoassets present their coin-specific factors, which can be tracked to their protocol specifics and are economically sound.https://doi.org/10.1186/s40854-023-00465-7CryptocurrencyBitcoinCusp catastrophe modelCrash |
| spellingShingle | Jiri Kukacka Ladislav Kristoufek Fundamental and speculative components of the cryptocurrency pricing dynamics Financial Innovation Cryptocurrency Bitcoin Cusp catastrophe model Crash |
| title | Fundamental and speculative components of the cryptocurrency pricing dynamics |
| title_full | Fundamental and speculative components of the cryptocurrency pricing dynamics |
| title_fullStr | Fundamental and speculative components of the cryptocurrency pricing dynamics |
| title_full_unstemmed | Fundamental and speculative components of the cryptocurrency pricing dynamics |
| title_short | Fundamental and speculative components of the cryptocurrency pricing dynamics |
| title_sort | fundamental and speculative components of the cryptocurrency pricing dynamics |
| topic | Cryptocurrency Bitcoin Cusp catastrophe model Crash |
| url | https://doi.org/10.1186/s40854-023-00465-7 |
| work_keys_str_mv | AT jirikukacka fundamentalandspeculativecomponentsofthecryptocurrencypricingdynamics AT ladislavkristoufek fundamentalandspeculativecomponentsofthecryptocurrencypricingdynamics |