bitcoin

Since bitcoin’s debut in 2009, numerous cryptocurrencies have emerged. According to CoinMarketCap,2 in August 12, 2019, there were 2440 crypto currencies and 19,836 exchanges with a market size of approximately 296.1 billion dollars, of which bitcoin accounted for 68.6% (203.1 billion dollars) of the total market. As crypto currencies are becoming more valuable as financial assets, new ones are continuously created. For example, in June 2019, Facebook officially announced plans to issue Libra Coin3 (now called ’Diem’) as a stable form of currency that can be exchanged for dollars, euros, etc. Furthermore, in August 2019, the U.S. Commodity Futures Trading Commission officially approved the Bakkt4 exchange to begin trading physically-settled bitcoin contracts for the first time. Thus, bitcoin is expected to continue to grow in the future and may soon be recognized as an international financial asset.

In accordance with this trend, we investigated the discriminating characteristics of bitcoin compared to other financial assets. Currently, the legalities and policies of bitcoin are unclear, the use of bitcoin in daily life is marginal, and there are no saving accounts in bitcoin and no interest [1]. Cryptocurrency markets are open 24 h a day, seven days a week like foreign exchange markets; thus, some have argued that bitcoin prices reflect the available information more than other types of financial assets such as stocks. Examining these characteristics, many studies have investigated whether bitcoin follows the efficient market hypothesis. Some researchers [2–4] have found that cryptocurrency follows this hypothesis, but others have argued the opposite [5,6]. Including cryptocurrency in an asset portfolio along with gold and dollars can be a means of hedging the risk of investing in other assets [7–9]. In addition, the bitcoin system issues money in a special form called mining and the total amount issued is limited, which has the advantage of suppressing inflation and deflation problems [10]. A blockchain-based decentralized system can reduce fees related to governance such as international transaction brokerage fees and transaction register books, which are cheaper with bitcoin than with retail foreign exchange markets [11]…

6.Conclusion

 We analyzed information flows between bitcoin prices and other financial assets in 27 countries, proving that bitcoin interacts with financial assets. In particular, the pattern of information flow with exchange rates was more significant than that of other financial assets such as stocks and government bonds. In addition, based on economic conditions by country, we found significant patterns of information flow from stocks and exchange rates to bitcoin in developed markets; the influence of these financial assets on bitcoin was also stronger than that in emerging markets. We expect our findings to strengthen valuation and stability of bitcoin as a financial asset and contribute to establishing efficient investment strategies…