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Quality & Quantity

, Volume 53, Issue 1, pp 91–105 | Cite as

Does Bitcoin bubble burst?

  • Zheng-Zheng Li
  • Ran Tao
  • Chi-Wei SuEmail author
  • Oana-Ramona Lobonţ
Article
  • 896 Downloads

Abstract

This paper explores when will occur and collapse in Bitcoin bubbles by applying generalized sup augmented Dickey–Fuller test method proposed by Phillips et al. (Testing for multiple bubbles: historical episodes of exuberance and collapse in the S&P 500. Singapore Management University, Working Paper, No. 04-2013, 2013). The results show that there are six explosive bubbles in China and five bubbles in U.S. market, mostly occur in the period of huge surges in Bitcoin price. This is consistent with the bubble model originated by Blanchard and Watson (Bubbles, rational expectations and financial markets. NBER Working Paper, No. 945 1982) that certain asset price is decomposed into fundamental and the bubble components. In particular, exogenous shocks, including foreign or domestic economic events lead to the origination of bubbles. Serious financial crisis may trigger long-term and large- scale bubbles, while relative not persistence (short-term) bubbles are caused by domestic particular components. It can be inferred that Bitcoin can be used as a hedge against market specific risk. Finally, Bitcoin bubbles would collapse due to the administrative intervention by economic authorities. Thereby, government should lead public expectation to keep the confidence to authority and reduce the speculation behavior to stabilize the asset price and financial market.

Keywords

Bitcoin Price bubble Speculation Block chain GSADF 

JEL Classification

G01 G12 C01 

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Copyright information

© Springer Science+Business Media B.V., part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of FinanceOcean University of ChinaQingdaoChina
  2. 2.Technological CenterShandong Entry-Exit Inspection and Quarantine BureauQingdaoChina
  3. 3.Department of FinanceWest University of TimisoaraTimisoaraRomania
  4. 4.School of EconomicsQingdao UniversityQingdaoChina

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