Influences on the Price of Bitcoin (PDF)

Master's Thesis from the year 2017 in the subject Economics - Finance, grade: 4.5, Lucerne University of Applied Sciences and Arts (Institute of Finance), course: Banking and Finance, language: English, abstract: Digital currencies are a critical part of the digitization process. Along with gaining momentum with investors, digital currencies are being prominently covered by the media. Bitcoin, in particular, has reached multiple peaks within the previous few years while showing a continuous upward trend in value. The research conducted in this paper aims to uncover the major influencers of the value of bitcoin.

An approach using micro economic and macroeconomic models is used to categorize bitcoin as commodity or currency. Furthermore, five major digital currencies are also analyzed for correlation with the value of bitcoin and analysis of volatility in the exchange rates.

Based on the evaluation criteria, it is found that bitcoin can be classified as commodity more than currency due to high influence of supply and demand rather than macroeconomic factors. Also, it can be concluded that the price of bitcoin is highly correlated with the digital currency Monero while the other currencies analyzed show a small to medium correlation based on the Pearson correlation coefficient.

The paper also analyzes major changes in the historical timeline of bitcoin by the way of qualitative analysis of major events that may have caused volatility. In conclusion, a future outlook is provided which outlines upcoming changes per the author's opinion.