Stylized Facts of a New Invisible Instrument

Year 2018
Author Albert S Hu, Christine Parlour, Uday Rajan
Publisher University of Michigan
Link View Research Paper


This paper presents stylized facts on the asset pricing properties of cryptocurrencies. It also presents summary statistics on cryptocurrency return properties and measures of common variation for secondary market returns on 222 digital coins. In the sample, secondary market returns of all other currencies are strongly correlated with Bitcoin returns. The researchers also provide some investment characteristics of a sample of 64 initial coin offerings (ICOs).

This paper contributes to an emerging literature on the pricing of Bitcoin, and the larger question of the economic value of cryptocurrencies. A number of papers are concerned with explaining valuation and pricing of Bitcoin from economic first principles. Athey et al. (2016) evaluate a model of adoption with Bitcoin prices up to 2015 and concludes that adoption cannot explain prices. Concerns about the speculative nature of Bitcoin are also posed in Yermack (2013). Ciaian et al. (2016) use an econometric approach to show that macro-financials do not explain Bitcoin prices. Gandal and Halaburda (2014) suggest that a network effect is present that characterises competition between different cryptocurrencies and explain Bitcoin’s early dominant pricing position.

It assesses the fact that traditional finance theories have often avoided explaining cryptocurrencies, but these financial concepts may actually best explain the pricing of different cryptocurrencies.

Discover the facts behind cryptocurrencies, the new invisible instrument.