Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297308 
Year of Publication: 
2023
Series/Report no.: 
ECB Working Paper No. 2868
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We analyse the drivers of Bitcoin transactions against 44 fiat currencies in the largest peer-to-peer crypto exchanges. Momentum and volatility in the cryptoasset market, as well as volatility and liquidity in global financial markets do matter for Bitcoin trading. There is suggestive evidence of a global crypto cycle driven by speculative motives. However, in emerging and developing economies (EMDEs), Bitcoin seems to offer also transactional benefits, since trading increases when the value of the domestic currency is unstable. Proxies of banking depth and digitalisation are negatively correlated with the currency loadings on the global factor, indicating that crypto-assets may offer a speculative alternative to traditional finance when this is not available, especially in EMDEs where the share of younger risk-prone population is higher. Our results clearly point to potential financial stability risks from cryptoisation in EMDEs with low levels of financial development and unstable fiat currencies.
Subjects: 
digital currencies
Bitcoin
peer-to-peer exchanges
financial development
JEL: 
E42
F21
F24
F32
F38
G15
O33
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-6245-2
Document Type: 
Working Paper

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