Research Article
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Price Bubbles in Cryptocurrency Market and Effects of Investor Attention

Year 2022, Volume: 6 Issue: 1, 108 - 131, 24.03.2022

Gamze Göçmen Yağcılar

https://doi.org/10.31200/makuubd.1078906
Cited By: 4

Abstract

Cryptocurrencies, which do not have a certain intrinsic value and whose price cannot be predicted with economic fundamentals, are open to speculation and the view that their prices are driven by a number of behavioral factors is becoming increasingly common. It is thought that these features trigger bubble formations as well as high volatility and uncertainty in the market. To test this assumption, the GSADF approach introduced by Phillips, Shi and Yu (2015) was applied using the weekly data set for the period 07.08.2015-30.01.2022 for six cryptocurrencies. In the examined period, bubble formations were detected in all six cryptocurrencies. The findings obtained by logistic regression analysis showed that Google Trends search queries, which are used as the representative of investor attractiveness, are effective in the formation of these bubbles. It is thought that the obtained results will be beneficial for investors, portfolio managers and regulatory authorities.

Keywords

Financial Bubbles Bitcoin GSADF Method Google Trends

References

  • Ali, R., Clews, R. & Southgate, J. (2014). The economics of digital currencies. Bank of England Quarterly Bulletin, 2014Q3, 276-286.
  • Anyfantaki, S., Arvanitis, S. & Topaloglou, N. (2021). Diversification benefits in the cryptocurrency market under mild explosivity. European Journal of Operational Research, 295, 378-393. https://doi.org/10.1016/j.ejor.2021.02.058
  • Baur, D. G. & Dimpfl, T. (2018). Asymmetric volatility in cryptocurrencies. Economic Letters, 173, 148-151. https://doi.org/10.1016/j.econlet.2018.10.008
  • Bouoiyour, J., Selmi, R. & Tiwari, A. (2014). Is Bitcoin business income or aspeculative bubble? Unconditional vs. conditional frequency domain analysis. MPRA Working Paper, No. 59595. Retrieved from https://mpra.ub.uni-muenchen.de/59595/
  • Bouri, E., Shahzad, S. J. H. & Roubaud, D. (2019). Co-explosivity in the cryptocurrency market. Finance Research Letters, 29, 178-183. https://doi.org/10.1016/j.frl.2018.07.005
  • Caferra, R. (2022). Sentiment spillover and price dynamics: Information flow in the cryptocurrency and stock market. Physica A, 593, 126983. https://doi.org/10.1016/j.physa.2022.126983
  • Cagli, E. C. (2019). Explosive behavior in the prices of Bitcoin and altcoins. Finance Research Letters, 29, 398-403. https://doi.org/10.1016/j.frl.2018.09.007
  • Chaim, P. & Laurini, M. L. (2019). Is Bitcoin a bubble? Physica A, 517, 222-232. https://doi.org/10.1016/j.physa.2018.11.031
  • Cheah, E. T. & Fry, J. (2015). Speculative bubbles in Bitcoin markets? An empirical investigation into the fundamental value of Bitcoin. Economics Letters, 130, 32-36. http://dx.doi.org/10.1016/j.econlet.2015.02.029
  • Chen, C. Y.-H. & Hafner, C. M. (2019). Sentiment-induced bubbles in the cryptocurrency market. Journal of Risk and Financial Management, 12(53), doi:10.3390/jrfm12020053
  • Cheung, A. (W.-K.), Roca, E. & Su, J.-J. (2015). Crypto-currency bubbles: an application of the Phillips-Shi-Yu (2013) methodology on Mt. Gox Bitcoin prices. Applied Economics, 47(23), 2348-2358. http://dx.doi.org/10.1080/00036846.2015.1005827
  • Chowdhury, Md. S. R., Damianov, D. S. & Elsayed, A. H. (2021). Bubbles and crashes in cryptocurrencies: Interdependence, contagion or asset rotation? Finance Research Letters, 102494, https://doi.org/10.1016/j.frl.2021.102494
  • Ciaian, P., Rajcaniova, M. & Kancs, d’A. (2016). The economics of Bitcoin price formation. Applied Economics, 48(19), 1799-1815. https://doi.org/10.1080/00036846.2015.1109038
  • Corbet, S., Lucey, B. & Yarovaya, L. (2018). Datestamping the Bitcoin and Ethereum bubbles. Finance Research Letters, 26, 81-88. https://doi.org/10.1016/j.frl.2017.12.006
  • Cretarola, A. & Figa-Talamanca, G. (2020). Bubble regime identification in an attention-based model for bitcoin and ethereum price dynamics. Economics Letters, 191, 108831. https://doi.org/10.1016/j.econlet.2019.108831
  • Cretarola, A. & Figa-Talamanca, G. (2021). Detecting bubbles in Bitcoin price dynamics via market exuberance. Annals of Operations Research, 299, 459-479. https://doi.org/10.1007/s10479-019-03321-z
  • Cross, J. L., Hou, C. & Trinh, K. (2021). Returns, volatility and the cryptocurrency bubble of 2017-18. Economic Modelling, 104, 105643. https://doi.org/10.1016/j.econmod.2021.105643
  • Dünya Gazetesi (28 Aralık 2017). Güney Kore sanal para borsaları kapatılabilir. https://www.dunya.com/dunya/guney-kore-sanal-para-borsalari-kapatilabilir-haberi-396211, erişim 11.02.2022
  • Enoksen, F. A., Landsnes, Ch. J., Lucivjanska, K. & Molnar, P. (2020). Understanding risk of bubbles in cryptocurrencies. Journal of Economic Behavior and Organization, 176, 129-144. https://doi.org/10.1016/j.jebo.2020.05.005
  • Fruehwirt, W., Hochfilzer, L., Weydemann, L. & Roberts, S. (2021). Cumulation, crash, coherency: A cryptocurrency bubble wavelet analysis. Finance Research Letters, 40, 101668. https://doi.org/10.1016/j.frl.2020.101668
  • Fry, J. & Cheah, E.-T. (2016). Negative bubbles and shocks in cryptocurrency markets. International Review of Financial Analysis, 47, 343-352. http://dx.doi.org/10.1016/j.irfa.2016.02.008
  • Fry, J. (2018). Booms, busts and heavy-tails: The story of Bitcoin and cryptocurrency markets? Economics Letters, 171, 225-229. https://doi.org/10.1016/j.econlet.2018.08.008
  • Geuder, J., Kinateder, H. & Wagner, N. F. (2019). Cryptocurrencies as financial bubbles: The case of Bitcoin. Finance Research Letters, 31, 179-184. https://doi.org/10.1016/j.frl.2018.11.011
  • Gronwald, M. (2021). How explosive are cryptocurrency prices? Finance Research Letters, 101603. https://doi.org/10.1016/j.frl.2020.101603
  • Kristoufek, L. (2013). Bitcoin meets Google Trends and Wikipedia: Quantifying the relationship between phenomena of the internet era. Nature Scientific Reports, 3: 3415. DOI: 10.1038/srep03415
  • Kyriazis, N., Papadamou, S. & Corbet, S. (2020). A systematic review of the bubble Dynamics of cryptocurrency prices. Research in International Business and Finance, 54, 101254. https://doi.org/10.1016/j.ribaf.2020.101254
  • Ma, D. & Tanizaki, H. (2019). The day-of-the-week effect on Bitcoin return and volatility. Research in International Business and Finance, 49, 127-136. https://doi.org/10.1016/j.ribaf.2019.02.003
  • Montasser, G. E., Chafeddine, L. & Benhamed, A. (2021). COVID-19, cryptocurrencies bubbles and digital market efficiency: sensitivity and similarity analysis. Finance Research Letters, https://doi.org/10.1016/j.frl.2021.102362
  • Shahzad, S. J. H., Anas, M. & Bouri, E. (2022). Price explosiveness in cryptocurrencies and Elon Musk’s tweets. Finance Research Letters, https://doi.org/10.1016/j.frl.2022.102695
  • Smales, L. A.(2022). Investor attention in cryptocurrency markets. International Review of Financial Analysis, 79, 101972. https://doi.org/10.1016/j.irfa.2021.101972
  • The Guardian, (2 Şubat 2018). Bitcoin biggest bubble in history, says economist who predicted 2008 crash, https://www.theguardian.com/technology/2018/feb/02/bitcoin-biggest-bubble-in-history-says-economist-who-predicted-2008-crash, erişim tarihi: 15.02.2022.
  • Wheatley, S., Sornette, D., Huber, T., Reppen, M., & Gantner, R. N. (2019). Are Bitcoin bubbles predictable? Combining a generalized Metcalfe’s Law and the Log-Periodic Power Law singularity model. Royal Society Open Science, 6, 180538. http://dx.doi.org/10.1098/rsos.180538

Kripto Para Piyasasında Fiyat Balonları ve Yatırımcı İlgisinin Etkisi

Year 2022, Volume: 6 Issue: 1, 108 - 131, 24.03.2022

Gamze Göçmen Yağcılar

https://doi.org/10.31200/makuubd.1078906
Cited By: 4

Abstract

Belirli bir içsel değeri bulunmayan ve fiyatı ekonomik temellerle tahmin edilemeyen kripto paraların spekülasyona açık oldukları ve fiyatlarının davranışsal birtakım faktörler tarafından yürütüldüğü görüşü giderek yaygınlık kazanmaktadır. Söz konusu özelliklerin piyasada yüksek volatilite ve belirsizliğin yanı sıra balon oluşumlarını da tetiklediği düşünülmektedir. Bu varsayımı test etmek üzere altı kripto para birimi için 07.08.2015-30.01.2022 dönemine ait haftalık veri seti kullanılarak Phillips, Shi ve Yu (2015) tarafından tanıtılan GSADF yaklaşımı uygulanmıştır. İncelenen dönemde altı kripto paranın tamamında balon oluşumları tespit edilmiştir. Lojistik regresyon analizi ile elde edilen bulgular ise bu balonların oluşumunda yatırımcı ilgisinin temsilcisi olarak kullanılan Google Trends arama sorgularının etkili olduğunu göstermiştir. Ulaşılan sonuçların yatırımcılar, portföy yöneticileri ve düzenleyici otoriteler için faydalı olacağı düşünülmektedir.

Keywords

Finansal Balonlar Bitcoin GSADF Yöntemi Google Trends

References

  • Ali, R., Clews, R. & Southgate, J. (2014). The economics of digital currencies. Bank of England Quarterly Bulletin, 2014Q3, 276-286.
  • Anyfantaki, S., Arvanitis, S. & Topaloglou, N. (2021). Diversification benefits in the cryptocurrency market under mild explosivity. European Journal of Operational Research, 295, 378-393. https://doi.org/10.1016/j.ejor.2021.02.058
  • Baur, D. G. & Dimpfl, T. (2018). Asymmetric volatility in cryptocurrencies. Economic Letters, 173, 148-151. https://doi.org/10.1016/j.econlet.2018.10.008
  • Bouoiyour, J., Selmi, R. & Tiwari, A. (2014). Is Bitcoin business income or aspeculative bubble? Unconditional vs. conditional frequency domain analysis. MPRA Working Paper, No. 59595. Retrieved from https://mpra.ub.uni-muenchen.de/59595/
  • Bouri, E., Shahzad, S. J. H. & Roubaud, D. (2019). Co-explosivity in the cryptocurrency market. Finance Research Letters, 29, 178-183. https://doi.org/10.1016/j.frl.2018.07.005
  • Caferra, R. (2022). Sentiment spillover and price dynamics: Information flow in the cryptocurrency and stock market. Physica A, 593, 126983. https://doi.org/10.1016/j.physa.2022.126983
  • Cagli, E. C. (2019). Explosive behavior in the prices of Bitcoin and altcoins. Finance Research Letters, 29, 398-403. https://doi.org/10.1016/j.frl.2018.09.007
  • Chaim, P. & Laurini, M. L. (2019). Is Bitcoin a bubble? Physica A, 517, 222-232. https://doi.org/10.1016/j.physa.2018.11.031
  • Cheah, E. T. & Fry, J. (2015). Speculative bubbles in Bitcoin markets? An empirical investigation into the fundamental value of Bitcoin. Economics Letters, 130, 32-36. http://dx.doi.org/10.1016/j.econlet.2015.02.029
  • Chen, C. Y.-H. & Hafner, C. M. (2019). Sentiment-induced bubbles in the cryptocurrency market. Journal of Risk and Financial Management, 12(53), doi:10.3390/jrfm12020053
  • Cheung, A. (W.-K.), Roca, E. & Su, J.-J. (2015). Crypto-currency bubbles: an application of the Phillips-Shi-Yu (2013) methodology on Mt. Gox Bitcoin prices. Applied Economics, 47(23), 2348-2358. http://dx.doi.org/10.1080/00036846.2015.1005827
  • Chowdhury, Md. S. R., Damianov, D. S. & Elsayed, A. H. (2021). Bubbles and crashes in cryptocurrencies: Interdependence, contagion or asset rotation? Finance Research Letters, 102494, https://doi.org/10.1016/j.frl.2021.102494
  • Ciaian, P., Rajcaniova, M. & Kancs, d’A. (2016). The economics of Bitcoin price formation. Applied Economics, 48(19), 1799-1815. https://doi.org/10.1080/00036846.2015.1109038
  • Corbet, S., Lucey, B. & Yarovaya, L. (2018). Datestamping the Bitcoin and Ethereum bubbles. Finance Research Letters, 26, 81-88. https://doi.org/10.1016/j.frl.2017.12.006
  • Cretarola, A. & Figa-Talamanca, G. (2020). Bubble regime identification in an attention-based model for bitcoin and ethereum price dynamics. Economics Letters, 191, 108831. https://doi.org/10.1016/j.econlet.2019.108831
  • Cretarola, A. & Figa-Talamanca, G. (2021). Detecting bubbles in Bitcoin price dynamics via market exuberance. Annals of Operations Research, 299, 459-479. https://doi.org/10.1007/s10479-019-03321-z
  • Cross, J. L., Hou, C. & Trinh, K. (2021). Returns, volatility and the cryptocurrency bubble of 2017-18. Economic Modelling, 104, 105643. https://doi.org/10.1016/j.econmod.2021.105643
  • Dünya Gazetesi (28 Aralık 2017). Güney Kore sanal para borsaları kapatılabilir. https://www.dunya.com/dunya/guney-kore-sanal-para-borsalari-kapatilabilir-haberi-396211, erişim 11.02.2022
  • Enoksen, F. A., Landsnes, Ch. J., Lucivjanska, K. & Molnar, P. (2020). Understanding risk of bubbles in cryptocurrencies. Journal of Economic Behavior and Organization, 176, 129-144. https://doi.org/10.1016/j.jebo.2020.05.005
  • Fruehwirt, W., Hochfilzer, L., Weydemann, L. & Roberts, S. (2021). Cumulation, crash, coherency: A cryptocurrency bubble wavelet analysis. Finance Research Letters, 40, 101668. https://doi.org/10.1016/j.frl.2020.101668
  • Fry, J. & Cheah, E.-T. (2016). Negative bubbles and shocks in cryptocurrency markets. International Review of Financial Analysis, 47, 343-352. http://dx.doi.org/10.1016/j.irfa.2016.02.008
  • Fry, J. (2018). Booms, busts and heavy-tails: The story of Bitcoin and cryptocurrency markets? Economics Letters, 171, 225-229. https://doi.org/10.1016/j.econlet.2018.08.008
  • Geuder, J., Kinateder, H. & Wagner, N. F. (2019). Cryptocurrencies as financial bubbles: The case of Bitcoin. Finance Research Letters, 31, 179-184. https://doi.org/10.1016/j.frl.2018.11.011
  • Gronwald, M. (2021). How explosive are cryptocurrency prices? Finance Research Letters, 101603. https://doi.org/10.1016/j.frl.2020.101603
  • Kristoufek, L. (2013). Bitcoin meets Google Trends and Wikipedia: Quantifying the relationship between phenomena of the internet era. Nature Scientific Reports, 3: 3415. DOI: 10.1038/srep03415
  • Kyriazis, N., Papadamou, S. & Corbet, S. (2020). A systematic review of the bubble Dynamics of cryptocurrency prices. Research in International Business and Finance, 54, 101254. https://doi.org/10.1016/j.ribaf.2020.101254
  • Ma, D. & Tanizaki, H. (2019). The day-of-the-week effect on Bitcoin return and volatility. Research in International Business and Finance, 49, 127-136. https://doi.org/10.1016/j.ribaf.2019.02.003
  • Montasser, G. E., Chafeddine, L. & Benhamed, A. (2021). COVID-19, cryptocurrencies bubbles and digital market efficiency: sensitivity and similarity analysis. Finance Research Letters, https://doi.org/10.1016/j.frl.2021.102362
  • Shahzad, S. J. H., Anas, M. & Bouri, E. (2022). Price explosiveness in cryptocurrencies and Elon Musk’s tweets. Finance Research Letters, https://doi.org/10.1016/j.frl.2022.102695
  • Smales, L. A.(2022). Investor attention in cryptocurrency markets. International Review of Financial Analysis, 79, 101972. https://doi.org/10.1016/j.irfa.2021.101972
  • The Guardian, (2 Şubat 2018). Bitcoin biggest bubble in history, says economist who predicted 2008 crash, https://www.theguardian.com/technology/2018/feb/02/bitcoin-biggest-bubble-in-history-says-economist-who-predicted-2008-crash, erişim tarihi: 15.02.2022.
  • Wheatley, S., Sornette, D., Huber, T., Reppen, M., & Gantner, R. N. (2019). Are Bitcoin bubbles predictable? Combining a generalized Metcalfe’s Law and the Log-Periodic Power Law singularity model. Royal Society Open Science, 6, 180538. http://dx.doi.org/10.1098/rsos.180538
There are 32 citations in total.

Details

Primary Language Turkish
Subjects Finance
Journal Section Articles
Authors

Gamze Göçmen Yağcılar 0000-0002-5009-4696

Publication Date March 24, 2022
Acceptance Date March 7, 2022
Published in Issue Year 2022 Volume: 6 Issue: 1

Cite

APA Göçmen Yağcılar, G. (2022). Kripto Para Piyasasında Fiyat Balonları ve Yatırımcı İlgisinin Etkisi. Mehmet Akif Ersoy Üniversitesi Uygulamalı Bilimler Dergisi, 6(1), 108-131. https://doi.org/10.31200/makuubd.1078906

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