A1802
Title: Fundamental and speculative components of the cryptocurrency pricing dynamics
Authors: Jiri Kukacka - Czech Academy of Sciences (Czech Republic) [presenting]
Ladislav Kristoufek - Charles University Prague (Czech Republic)
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. Five cryptoassets with different backgrounds are studied, 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.
