Many source of information question the nature of Bitcoin and other cryptocurrency. Is it a money, a commodity, a payment system ? We will also see what are the implications of its nature. We are going to summarize what has been said about this subject.

Most of the articles start reminding us the recent and quick emergence of cryptocurrencies, such as Bitcoin. Some articles even go further developing a small historical retrospective of money and transaction history. Furthermore, it is interesting to note that most of them also insist a lot about how revolutionary and useful their approach and discoveries are.
Their main focuses are:
to question the nature of Bitcoin : if it is a fiat currency (standard financial asset) or a pure speculative currency (Cheah/Fry, 2015)(Kubat 2014) ;
to question its long-term viability and evolution ;
to understand the drivers of its price and number of transaction. (Kim et.al 2016). Corrolary subjects are the propensity of Bitcoin to speculation and crashes (Cheah/Fry 2015) (Donier/Bouchaud 2015).



To study these themes, they use different methods. We can note that change of scale is very usual amongst these studies. Some study smaller markets such as online virtual game currencies to understand Bitcoin market (Kim et.al 2016) As a matter of fact these markets are smaller but their history are often longer than Bitcoin’s. Other articles study one or several (up to three for the Korean study) cryptocurrency markets to better understand « real » financial market dynamics (Kondor et.al 2014) (Kim et.al 2015) (Donier/Bouchaud 2015).

A scientific article studies the past, that is to say Bitcoin predecessor’s histories (mostly game currencies) to predict Bitcoin market evolution (Thomas Kim 2015). This article interestingly underscores the potentiality to use game currencies to better understand real currencies and even test economic theories.

One articles studies the relationship between Bitcoin markets in the USA and in China (Kristoufek 2015) and another one between Bitcoin market and US dollar market (Chu/Nadarajah/Chan 2015). Some articles study electronic money currencies in general : Bitcoin, E-cash, visa, Paypal, Checkfree (Durgun/Timur 2015).

Some articles focus on Bitcoin and data about Bitcoin to do their study. They use the fact that unlike the everyday monetary transactions, information about Bitcoin transactions are publicly available. So it provides useful information to study the transaction network for instance (Kondor et.al 2014)(Donier/Bouchaud 2015). One studies users comments in online communities to predict the price (Kim et.al 2016). Others use statistical and modelling tools (Chu/Nadarajah/Chan 2015) (Kondor et.al 2014) (Cheah/Fry 2015)

FIAT CURRENCY ?

References

The purpose or one of the purposes of half of them is to better understand and predict Bitcoin price dynamic (Kristoufek 2015) (Kim et.al 2016) (Donier/Bouchaud 2015). To do so they use various data such as the available information about the payment network, the user comments or the exchange rate with the US dollar. Then, they analyze these information with statistical tools or algorithms (Donier/Bouchaud 2015).

Most of them conclude that Bitcoin and other cryptocurrencies represent a speculative market subject to speculative bubbles and that Bitcoin can therefore not be considered as a fiat currency (Cheah/Fry 2015) (Donier/Bouchaud 2015). Still, even if they state Bitcoin cannot be a store of value money, some articles admit that Bitcoin is not a pure speculative asset, but that it also shares characteristics of a standard financial asset. For instance usage in trade, money supply and price level play a role in Bitcoin price (Kubat 2014). For now, they state that investor’s interest in cryptocurrency amplifies its price’s movements (Kristoufek 2015). They assume that in the future, Bitcoin and other cryptocurrencies will be less influenced by speculation. An article from USA for example, states that in the future, Bitcoin price will have more stability and keep low transaction costs (Thomas Kim 2015). This article claims Bitcoin is almost a « real » money.

However, all articles do not agree. Some stress its controversial aspect (Kristoufek 2015).The more pessimistic one is from Turkey (Durgun/Timur 2015): it emphasizes that due to excessive volatility, Bitcoin can not be a daily care and is limited to exceptional group. Even if it is developing, monetary system and institutions and state-owned center do not use it. Thus it has limited impact on markets. It also underlines the negative aspects of lack of regulation and of internet network insecurity. (Durgun/Timur 2015).

Most of them conclude that Bitcoin and other cryptocurrencies represent a speculative market subject to speculative bubbles and that Bitcoin can therefore not be considered as a fiat currency (Cheah/Fry 2015) (Donier/Bouchaud 2015). Still, even if they state Bitcoin cannot be a store of value money, some articles admit that Bitcoin is not a pure speculative asset, but that it also shares characteristics of a standard financial asset. For instance usage in trade, money supply and price level play a role in Bitcoin price (Kubat 2014). For now, they state that investor’s interest in cryptocurrency amplifies its price’s movements (Kristoufek 2015). They assume that in the future, Bitcoin and other cryptocurrencies will be less influenced by speculation. An article from USA for example, states that in the future, Bitcoin price will have more stability and keep low transaction costs (Thomas Kim 2015). This article claims Bitcoin is almost a « real » money.

However, all articles do not agree. Some stress its controversial aspect (Kristoufek 2015).The more pessimistic one is from Turkey (Durgun/Timur 2015): it emphasizes that due to excessive volatility, Bitcoin can not be a daily care and is limited to exceptional group. Even if it is developing, monetary system and institutions and state-owned center do not use it. Thus it has limited impact on markets. It also underlines the negative aspects of lack of regulation and of internet network insecurity. (Durgun/Timur 2015).

Still, most of the articles are quite optimistic and curious about the future development of Bitcoin and other cryptocurrencies.

Credits:
Cynthia MARTIN

1- [United.Kingdom.] Tuck Cheah, John Fry (2015). Speculative bubbles in Bitcoin markets ? An empirical investigation into the fundamental value of Bitcoin, Economics letters.
2-[Czech republic] Max Kubat (2014). Virtual currency bitcoin in the scope of money definition and store of value, Procedia Economics and Finance
3- [Hungary] Daniel Kondor, Marton Posfai, Istvan Csabai, Gabor Vattai (2014, February,5). Do richer get richer ? An empirical analysis of the bitcoin transaction network, Plos One
4- [Hungary] Ladislav Kristoufek (2015, April, 15). What are the main drivers of the bitcoin price ? Evidence from Wavelet Coherence Analysis, Plos One
5- [United State of America] Thomas Kim (2015, April, 28). The predecessors of Bitcoin and their implications for the prospect of virtual currencies, Plos One
6- [South Korea] Young Bin Kim, Ju Gi Kim, Wook Kim, Jae Ho Im, Tae Hyeong Kim, Shin Jin Kang, Chang Hun Kim (2016, August, 17). Predicting Fluctuations in Cryptocurrency transactions based on users comments and replies, Plos One
7- [United Kingdom] Jeffrey Chu, Saralees Nadarajah, Stephen Chan (2015, July, 29). Statistical analysis of the exchange rate of bitcoin, Plos One
8- [South Korea] Young Bin Kim, Sang Hyeok Lee, Shin Jin Kang, Myung Jin Choi, Jung Lee, Chang Hun Kim (2015, August, 4). Virtual world currency value fluctuation prediction system based on user sentiment analysis, Plos One
9- [France] Jonathan Donier, Jean-Philippe Bouchaud (2015, October, 8). Why do markets crash ? Bitcoin data offers unprecedented insight, Plos One
10- [Turkey] Ozlem Durgun, Mustafa Caner Timur (2015). Electronic payment and monetary policies, World Conference on Technology, Innovation and Entrepreneurship
11- Fernando Ulrich, (2016, July, 7) Bitcoin supera o ouro no Brasil, Infomoney, Retrieved from : http://www.infomoney.com.br/blogs/cambio/moeda-na-era-digital/post/5288549/bitcoin-sup