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04-01-2021

Identifying price bubble periods in the Bitcoin market-based on GSADF model

Authors: Yan Li, Zhicheng Wang, Hongchuan Wang, Meiyu Wu, Lingling Xie

Published in: Quality & Quantity | Issue 5/2021

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Abstract

The advert of cryptocurrency era is signified by the luanch of Bitcoin, which has been considered as a milestone event. Ever since its emergence, Bitcoin has experienced rapid price increase along with great price fluctuations. This paper aims to explore the beginning and the culmination of possible speculative bubbles the Bitcoin market. Based on the daily closing price of Bitstamp, a major Bitcoin exchange platform, from September 13, 2011 to October 12, 2020, this paper adopts GSADF (generalized sup augmented Dickey–Fuller) to explore the existence of the bubble in the Bitcoin market, estimate the time of emergence and collapse of the bubble, investigate the causes of the bubbles based on its time order, and attempts to put forward some policy suggestions. Through this study, we have found that: (1) There are a lot of speculative bubbles. During the research period, there were a total of four long bubbles (i.e. 2013.01.25–2013.04.05; 2013.11.05–2013.12.10; 2017.04.27–2017.07.05; 2017.07.15 –2018.01.09) and four short bubbles (2016.06.08–2016.06.18; 2016.12.30–2017.01.15; 2017.02.22 –2017.03.07; 2019.06.19 –2019.06.25). (2) The emergence and burst of bubbles were mostly related to the occurrence of relevant events and policies. (3) Bitcoin market is far from mature. A key policy risk triggering the speculative behavior is policy announcement. The prominent innovation of this paper is that the latest developed bubble detection method GSADF has been employed in the Bitcoin market. This method can detect the existence of multiple Bitcoin bubbles and their durations.

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There are many trading platforms of Bitcoin, and there are still some hidden dangers in terms of their security. On February 28, 2014, the world's largest trading platform operators Mt. Bigger at that time declared bankruptcy protection because 850,000 bitcoins ($467 million) were stolen, which caused a great loss to investors.

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Title: Identifying price bubble periods in the Bitcoin market-based on GSADF model
Authors: Yan Li
Zhicheng Wang
Hongchuan Wang
Meiyu Wu
Lingling Xie
Publication date: 04-01-2021
Publisher: Springer Netherlands
Published in: Quality & Quantity / Issue 5/2021
Print ISSN: 0033-5177
Electronic ISSN: 1573-7845
DOI: https://doi.org/10.1007/s11135-020-01077-4

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