Study of the dynamic of Bitcoin's price

Julien Chevallier (1) , Stéphane Goutte (1) , Khaled Guesmi (2) , Samir Saadi (3)

1 UP8 - Université Paris 8 Vincennes-Saint-Denis
2 IPAG Paris
3 École de gestion Telfer / Université d'Ottawa

This study contributes to the existing literature on the empirical characteristics of virtual currency allowing for dynamic transition between different economic regimes and considering various crashes and rallies over the business cycle, that are captured by jumps. We combine Markov-switching models with Levy jump-diffusion offer a new model that captures the different sub-period of crises over the business cycle, that are captured by jumps. This method also enables to test the relevance of dynamic measures of regime switching with respect to independent pure-jump process, which are not frequently used in the literature. Bitcoin offer something different than a traditional currency; there is potential value of having a network that helps as a secure repository for the common knowledge of all transactions. In addition, value of bitcoin fluctuates so wildly that it may be too risky to serve as a credible store of value.

Mots clés: Bitcoin; Jump process; Markov-switching model

Domaines: Economies et finances; Pricing [q-fin.PR]; Mathématiques [math]; Applications [stat.AP]; Probabilités [math.PR]; Statistiques [math.ST]; Économie et finance quantitative [q-fin]; Finance quantitative [q-fin.CP]; Econométrie de la finance [q-fin.ST]

Julien Chevallier, Stéphane Goutte, Khaled Guesmi, Samir Saadi. Study of the dynamic of Bitcoin's price. 2019. ⟨halshs-02175669⟩