Fair market value of bitcoin: halving effect
-
DOIhttp://dx.doi.org/10.21511/imfi.16(4).2019.07
-
Article InfoVolume 16 2019, Issue #4, pp. 72-85
- Cited by
- 3935 Views
-
1047 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
The purpose of this article is to analyze the effect that halving has on the fair market value of bitcoins. The main hypothesis of the study is that the decline in the cost of miners’ remuneration for mining is a significant factor that affects the price of cryptocurrencies. The article examines the factors that regulate the issuing process. The significance of a limited supply of bitcoin is detailed in the article, as well as the mechanism for the implementation of the issue of new bitcoins. The study compares the historical inflation data of the US dollar and the projected data on the inflation of bitcoin. The article analyzes the main technical element of cryptocurrency – halving – when the miner’s reward is halved. This analysis includes the mathematical methods of statistical data processing. Research results show that reducing remuneration by half every four years leads to an increased market value of the cryptocurrency. This relationship is clearly illustrated by the Kendall rank correlation method. The results of the study can have a significant impact on the fundamental assessment of bitcoin and can also enable investors to assess any of the existing and operating cryptocurrencies according to this method.
- Keywords
-
JEL Classification (Paper profile tab)E31, E42, G15
-
References34
-
Tables3
-
Figures6
-
- Figure 1. Bitcoin emission for the years 2009–2140
- Figure 2. US dollar inflation 1914–2014, %
- Figure 3. Bitcoin inflation 2009–2109, %
- Figure 4. Logarithmic graph of the value of the bitcoin 2011–2019, US dollars
- Figure 5. The effect of emission reduction of bitcoins on the price, July 2011 – March 2015
- Figure 6. The effect of emission reduction of bitcoins on the price, April 2015 – November 2018
-
- Table 1. Bitcoin emission
- Table 2. Bitcoin inflation
- Table 3. Average price change and bitcoin block remuneration
-
- Balcilar, M., Bouri, E., Gupta, R., & Rouband, D. (2017). Can volume predict Bitcoin returns and volatility? A quantiles-based approach. Economic Modeling, 64, 74-81.
- Briere, M., Oosterlinck, K., & Szafarz, A. (2015). Virtual currency, tangible return: Portfolio diversification with bitcoin. SSRN Electronic Journal, 16(6), 365-373.
- Brühl, V. (2017). Virtual Currencies, Distributed Ledgers and the Future of Financial Services. Intereconomics, 52(6), 370-378.
- Böhme, R., Christin, N., Edelman, B., & Moore, T. (2015). Bitcoin: economics, technology, and governance. Journal of Economic Perspectives, 29(2), 213-238.
- Brown, B. (2017). Goods Inflation, Asset Inflation, and the Greatest Peacetime Inflation in the US. Atlantic Economic Journal, 45(4), 429-442.
- Corbet, S., Lucey, B., Urquhart, A., & Yarovaya, L. (2018). Cryptocurrencies as a financial asset: a systematic analysis. International Review of Financial Analysis, 62, 182-199.
- Chaim, P., & Laurini, M. P. (2018). Volatility and return jumps in bitcoin. Economics Letters, 173, 158-163.
- Ciaian, P., Rajcaniova, M., & Kancs, D. (2016). The digital agenda of virtual currencies: Can BitCoin become a global currency. Information Systems and e-Business Management, 14(4), 883-919.
- Denisova, V., Mikhaylov, А., & Lopatin, E. (2019), Blockchain Infrastructure and Growth of Global Power Consumption. International Journal of Energy Economics and Policy, 9(4), 22-29.
- Denisova, V. (2019). Energy efficiency as a way to ecological safety: evidence from Russia. International journal of energy economics and policy, 9(5), 32-37.
- Dierksmeier, C., & Seele, P. (2018). Cryptocurrencies and Business Ethics. Journal of Business Ethics, 152(1), 1-14.
- Dorfleitner, G., & Lung, C. (2018). Cryptocurrencies from the perspective of euro investors: a re-examination of diversification benefits and a new day-of-the-week effect. Journal of Asset Management, 19(7), 472-494.
- Derks, J., Gordijn, J., & Siegmann, A. (2018). From chaining blocks to breaking even: A study on the profitability of bitcoin mining from 2012 to 2016. Electronic Markets, 28(3), 321-338.
- Fratianni, M., & Hauskrecht, A. (1998). From the Gold Standard to a Bipolar Monetary System. Open Economies Review, 9(1), 609-636.
- Hong, K. (2016). Bitcoin as an alternative investment vehicle. Information Technology and Management, 18(4), 265-275.
- Kroll, J. A., Davey, I. C., & Felten, E. W. (2013). The economics of Bitcoin mining, or Bitcoin in the presence of adversaries. Proceedings of WEIS, 1(1).
- Lischke, M., & Fabian, B. (2016). Analyzing the Bitcoin network: the first four years. Future Internet 8(1), 7.
- Lopatin, E. (2019a). Methodological Approaches to Research Resource Saving Industrial Enterprises. International Journal of Energy Economics and Policy, 9(4), 181-187.
- Lopatin, E. (2019b). Assessment of Russian banking system performance and sustainability. Banks and Bank Systems, 14(3), 202-211.
- Meynkhard, A. (2019). Energy Efficient Development Model for Regions of the Russian Federation: Evidence of Crypto Mining. International Journal of Energy Economics and Policy, 9(4), 16-21.
- Mikhaylov, A. (2019). Oil and Gas Budget Revenues in Russia after Crisis in 2015. International Journal of Energy Economics and Policy, 9(2), 2019, 375-380.
- Mikhaylov, A., Sokolinskaya, N., & Lopatin, E. (2019). Asset allocation in equity, fixed-income and cryptocurrency on the base of individual risk sentiment. Investment Management and Financial Innovations, 16(2), 171-181.
- Mikhaylov, А., Sokolinskaya, N., & Nyangarika, А. (2018). Optimal Carry Trade Strategy Based on Currencies of Energy and Developed Economies. Journal of Reviews on Global Economics, 7, 582-592.
- Mikhaylov, A. (2018a). Pricing In Oil Market And Using Probit Model For Analysis Of Stock Market Effects. International Journal of Energy Economics and Policy, 8(2), 69-73.
- Mikhaylov, A. (2018b). Volatility Spillover Effect between Stock and Exchange Rate in Oil Exporting Countries. International Journal of Energy Economics and Policy, 8(3), 321-326.
- Mba, J. C., Pindza, E., & Koumba, U. (2018). A differential evolution copula-based approach for a multi-period cryptocurrency portfolio optimization. Financial Markets and Portfolio Management, 32(4), 399-418.
- Nakamoto, S. (2008). Bitcoin: A Peer-to-Peer Electronic Cash System.
- Nelson, B. (2018). Financial stability and monetary policy issues associated with digital currencies. Journal of Economics and Business, 100, 76-78.
- Nair, M., & Cachanosky, N. (2017). Bitcoin and entrepreneurship: breaking the network effect. The Review of Austrian Economics, 30(3), 263-275.
- Nyangarika, А., Mikhaylov, А., & Richter, U. (2019a). Influence Oil Price towards Macroeconomic Indicators in Russia. International Journal of Energy Economics and Policy, 9(1), 123-130.
- Nyangarika, A., Mikhaylov, A., & Richter, U. (2019b). Oil Price Factors: Forecasting on the Base of Modified Auto-regressive Integrated Moving Average Model. International Journal of Energy Economics and Policy, 9(1), 149-160.
- Nyangarika, А., Mikhaylov, А., & Tang, B-J. (2018). Correlation of Oil Prices and Gross Domestic Product in Oil Producing Countries. International Journal of Energy Economics and Policy, 8(5), 42-48.
- Sauer, B. (2016). Virtual Currencies, the Money Market, and Monetary Policy. International Advances in Economic Research, 22(2), 117-130.
- Yi, S., Xu, Z., & Wang, G. (2018). Volatility connectedness in the cryptocurrency market: Is Bitcoin a dominant cryptocurrency? International Review of Financial Analysis, 60, 98-114.