The Price of Bitcoin: GARCH Evidence from Radio Frequency Data – Journal of Investment Strategies
- Structural GARCH model of Bitcoin price and yield volatility
- High frequency hourly data for Bitcoin
- Transactional demand and speculative demand increase the price of Bitcoin
- Bitcoin price reacts negatively to bitcoin speed
This is the first paper to estimate the price determinants of Bitcoin in a generalized autoregressive conditional heteroscedasticity (GARCH) framework using high frequency data. Derived from a theoretical model, we structurally estimate the Bitcoin transaction demand and the speculative demand models based on the hourly data for 2013-21. Consistent with the theoretical hypothesis, our empirical results confirm that both Bitcoin transaction demand and speculative demand have a statistically significant impact on Bitcoin pricing. Bitcoin price reacts negatively to Bitcoin speed, while positive shocks across Bitcoin stock, interest rate, and the size of the Bitcoin economy put upward pressure on Bitcoin price.
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