Date of Award

2015

Document Type

Thesis

Degree Name

Bachelors

Department

Social Sciences

First Advisor

Khemraj, Tarron

Keywords

Bitcoin, Finances, Economics, Analysis

Area of Concentration

Economics

Abstract

This analysis examines the long and short run price determinants of bitcoin and which functions of bitcoin in the financial market has the largest influence on price. As well, the primary function of bitcoin in financial markets is determined by analysing the effects of investment, demand, speculation, and the usage of bitcoin as a currency or an asset. This was done through estimating a TARCH in mean cointegrated long run relationship and a vector error correction model to examine the short run dynamics of bitcoin prices. The results show that the main function of bitcoin is as a speculative asset, and that market size is the main driver of the long run price. The short run dynamics of bitcoin were found to be only significantly affected by changes in liquidity due to changes in demand, while the changes in speculation and investment were found to have no significant effects.

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