Bitcoin: Medium of exchange or speculative assets?

Bitcoin is defined as digital money within a decentralized peer-to-peer payment network. It is a hybrid between fiat currency and commodity currency without intrinsic value and independent of any government or monetary authority. This paper analyses the question of whether Bitcoin is a medium of exc...

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Bibliographic Details
Published inJournal of international financial markets, institutions & money Vol. 54; pp. 177 - 189
Main Authors Baur, Dirk G., Hong, KiHoon, Lee, Adrian D.
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.05.2018
Subjects
Alternative currency
Asset class
Bitcoin
Digital currency
Medium of exchange
Safe haven
Digital currency
Alternative currency
Safe haven
Bitcoin
Medium of exchange
Asset class
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Summary:Bitcoin is defined as digital money within a decentralized peer-to-peer payment network. It is a hybrid between fiat currency and commodity currency without intrinsic value and independent of any government or monetary authority. This paper analyses the question of whether Bitcoin is a medium of exchange or an asset and more specifically, what is its current usage and what usage will prevail in the future given its characteristics. We analyse the statistical properties of Bitcoin and find that it is uncorrelated with traditional asset classes such as stocks, bonds and commodities both in normal times and in periods of financial turmoil. The analysis of transaction data of Bitcoin accounts shows that Bitcoins are mainly used as a speculative investment and not as an alternative currency and medium of exchange.
ISSN:1042-4431
1873-0612
DOI:10.1016/j.intfin.2017.12.004