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Buzz Factor or Innovation Potential: What Explains Cryptocurrencies' Returns?

Wang, S; Vergne, J-P; (2017) Buzz Factor or Innovation Potential: What Explains Cryptocurrencies' Returns? PLoS One , 12 (1) , Article e0169556. 10.1371/journal.pone.0169556. Green open access

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Abstract

Cryptocurrencies have become increasingly popular since the introduction of bitcoin in 2009. In this paper, we identify factors associated with variations in cryptocurrencies' market values. In the past, researchers argued that the "buzz" surrounding cryptocurrencies in online media explained their price variations. But this observation obfuscates the notion that cryptocurrencies, unlike fiat currencies, are technologies entailing a true innovation potential. By using, for the first time, a unique measure of innovation potential, we find that the latter is in fact the most important factor associated with increases in cryptocurrency returns. By contrast, we find that the buzz surrounding cryptocurrencies is negatively associated with returns after controlling for a variety of factors, such as supply growth and liquidity. Also interesting is our finding that a cryptocurrency's association with fraudulent activity is not negatively associated with weekly returns-a result that further qualifies the media's influence on cryptocurrencies. Finally, we find that an increase in supply is positively associated with weekly returns. Taken together, our findings show that cryptocurrencies do not behave like traditional currencies or commodities-unlike what most prior research has assumed-and depict an industry that is much more mature, and much less speculative, than has been implied by previous accounts.

Type: Article
Title: Buzz Factor or Innovation Potential: What Explains Cryptocurrencies' Returns?
Location: United States
Open access status: An open access version is available from UCL Discovery
DOI: 10.1371/journal.pone.0169556
Publisher version: https://doi.org/10.1371/journal.pone.0169556
Language: English
Additional information: This work is licensed under a Creative Commons Attribution 4.0 International License. The images or other third party material in this article are included in the Creative Commons license, unless indicated otherwise in the credit line; if the material is not included under the Creative Commons license, users will need to obtain permission from the license holder to reproduce the material. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/
Keywords: Commerce, Economics, Humans, Marketing, Models, Economic, Socioeconomic Factors
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > UCL School of Management
URI: https://discovery.ucl.ac.uk/id/eprint/10104388
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