Work detail

Exploring the relationship between Bitcoin price and the network's hashrate

Author: Bc. Jan Kubal
Year: 2021 - summer
Leaders: prof. PhDr. Ladislav Krištoufek Ph.D.
Work type: Bachelors
Language: English
Pages: 74
Awards and prizes:
Abstract: The goal of the thesis is to identify factors that drive the price of Bitcoin and the
hashrate of the Bitcoin network, which represents the total computing power dedicated
to Bitcoin mining, and to explore the relationship between these two variables. In the
Bitcoin system, four variables were assumed to be endogenous, thus for each of them,
an equation was constructed. This was the case of the Bitcoin price, the hashrate of
the Bitcoin network, the total transaction fees paid, and the search volume for the term
“bitcoin”. The system of four equations was then simultaneously estimated, utilizing the
method of Two-stage least squares.
Results revealed several statistically significant explanatory variables of the price and
the hashrate, including the money supply of the United States dollar or the number
of unique active addresses on the Bitcoin network. The hashrate was shown to drive the
price positively, however, the estimated effect of the price on the hashrate was statistically
insignificant. It was argued that it might have been caused by exogenous shocks affecting
multiple variables, that could not be accounted for in the data. In addition, the factors
affecting the hashrate were assessed from the environmental point of view, as the high
environmental impact is one of the main points in the criticism of Bitcoin.


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