Journal Article10.2139/SSRN.3278469
Flight to Bitcoin
Yang (Gloria) Yu,Jinyuan Zhang +1 more
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TL;DR: In this article, a novel phenomenon of flight-to-bitcoin (FTB) is uncovered, whereby local demand for Bitcoin increases with local economic policy uncertainties, and the authors find that FTB is mainly driven by a lack of confidence in local authorities.
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Abstract: This paper uncovers a novel phenomenon of flight-to-Bitcoin (FTB) whereby local demand for Bitcoin increases with local economic policy uncertainties. FTB holds across Bitcoin demand proxies including local premiums over the US market, turnover, and web traffic on cryptocurrency exchanges. We find that FTB is mainly driven by a lack of confidence in local authorities. Consistent with this interpretation, FTB is stronger during corruption incidents and Bitcoin ownership shifts from centralized exchanges to decentralized wallets amid turbulence. A comparison with safe-haven assets further differentiates FTB from other forms of flight-to-safety. The evidence collectively illustrates an overlooked motivation of Bitcoin investment: investors hold Bitcoin to mitigate their concerns about local authorities.
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Citations
Decentralizing Money: Bitcoin Prices and Blockchain Security
TL;DR: It is shown how Bitcoin’s viability versus fiat currency depends on relative acceptability and inflation protection, and how price–security feedback amplifies fundamental shocks’ volatility impact and leads to boom–busts not driven by fundamentals.
164
Decentralizing Money: Bitcoin Prices and Blockchain Security
TL;DR: It is shown how Bitcoin’s viability versus fiat currency depends on relative acceptability and inflation protection, and how price–security feedback amplifies fundamental shocks’ volatility impact and leads to boom–busts not driven by fundamentals.
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TL;DR: In this paper , the authors show that when large exchanges list new tokens, trade volumes on small exchanges increase, and small exchanges become more likely to list, and rationalize these facts in a model where small exchanges have captive customer bases, and rely on arbitrage trade with large exchanges for liquidity provision.
1
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