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Buchholz, Martis , Jess Delaney, Joseph Warren and Jeff Parker. “Bits and Bets Information, Price Volatility, and Demand for BitCoin”. Working paper.

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Article

Determinants of Bitcoin Expected Returns

1Economics and Finance Department, Southeast Missouri State University, One University Plaza, Cape Girardeau


Journal of Finance and Economics. 2019, Vol. 7 No. 1, 42-47
DOI: 10.12691/jfe-7-1-5
Copyright © 2019 Science and Education Publishing

Cite this paper:
Frederick Adjei. Determinants of Bitcoin Expected Returns. Journal of Finance and Economics. 2019; 7(1):42-47. doi: 10.12691/jfe-7-1-5.

Correspondence to: Frederick  Adjei, Economics and Finance Department, Southeast Missouri State University, One University Plaza, Cape Girardeau. Email: fadjei@semo.edu

Abstract

In this study, we investigate the relationship between Bitcoin mining technology variables and Bitcoin returns, using a GARCH-M model. Additionally, we examine the predictive power of the mining technology variables on future Bitcoin returns. We find that mining difficulty and block size are inversely related to Bitcoin returns. Additionally, our findings signifying that the higher the block size the lower the Bitcoin price and consequently the lower the expected return. Second, our findings show that mining difficulty and block size are robust predictors of future Bitcoin returns.

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