# The Price of BitCoin: GARCH Evidence from High Frequency Data

## TL;DR

This paper analyzes the determinants of Bitcoin's price using a GARCH model with high-frequency hourly data from 2013 to 2018, confirming the impact of transaction and speculative demand on price formation.

## Contribution

First to estimate Bitcoin's price determinants within a GARCH framework using high-frequency data and a theoretical model.

## Key findings

- Bitcoin transaction and speculative demands significantly affect price.
- Price responds negatively to Bitcoin velocity.
- Shocks to stock, interest rate, and economy size increase price.

## Abstract

This is the first paper that estimates the price determinants of BitCoin in a Generalised Autoregressive Conditional Heteroscedasticity framework using high frequency data. Derived from a theoretical model, we estimate BitCoin transaction demand and speculative demand equations in a GARCH framework using hourly data for the period 2013-2018. In line with the theoretical model, our empirical results confirm that both the BitCoin transaction demand and speculative demand have a statistically significant impact on the BitCoin price formation. The BitCoin price responds negatively to the BitCoin velocity, whereas positive shocks to the BitCoin stock, interest rate and the size of the BitCoin economy exercise an upward pressure on the BitCoin price.