Publication detail

Fundamental and speculative components of the cryptocurrency pricing dynamics

Author(s): prof. PhDr. Ladislav Krištoufek Ph.D.,
PhDr. Jiří Kukačka Ph.D.,
Type: Articles in journals with impact factor
Year: 2023
Number: 0
Published in: Financial Innovation, 9 (61), pp. 1-23, DOI
Publishing place:
Keywords: cryptocurrency, Bitcoin, cusp catastrophe model, crash
JEL codes: C52; G12
Suggested Citation: Kukacka, J., Kristoufek, L. (2023). Fundamental and speculative components of the cryptocurrency pricing dynamics. Financial Innovation, 9 (61), pp. 1-23.
Grants: PRIMUS/19/HUM/17 2019-2021 Behavioral finance and macroeconomics: New insights for the mainstream
Abstract: The driving forces behind cryptoassets' price dynamics are often perceived as being dominated by speculative factors and inherent bubble-bust episodes. The fundamental components are believed to have a weak, if any, role in the price formation process. This research studies five cryptoassets with different backgrounds, including Bitcoin, Ethereum, Litecoin, XRP, and Dogecoin between 2016 and 2022. It utilizes the cusp catastrophe model to connect the fundamental and speculative drivers with possible price bifurcation characteristics of events of a market collapse. The findings show that all studied assets except Dogecoin demonstrate their price and returns dynamics emerge from complex interactions among both fundamental and speculative components, including episodes of price bifurcations. Bitcoin shows the strongest fundamentals, with the on-chain activity and economic factors driving the fundamental part of the dynamics. Investor attention and off-chain activity mainly drive the speculative component for all studied assets. Within the fundamental drivers, the analyzed cryptoassets present their coin-specific factors, which can be tracked to their protocol specifics and are economically sound.
June 2023


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