Assessing Qualification of Crypto Currency as A Financial Assets: A Case Study on Bitcoin

Abstract

We assess the qualification of Crypto Currency as a new emerging financial asset class using Bitcoin as a sample study. As a financial asset class, its value should be derived from business prospects, uncertainty, and opportunity cost of money (riskless rate). We model the asset value relationship in form of an error correction model in regard of possible nonstationary data properties. We use GSCI commodity index, S&P 500 Index, Economic Policy Uncertainty Index and Yield of 5-year US Treasury Bonds as proxies of explanatory variables. Our findings show that the notion of crypto currency as a financial asset might be spurious. Common stochastic trend is the source of apparent correlation between Bitcoin and the regressors. This lack of fundamental linkage opens a way to improve cryptocurrency business model for greater global acceptance.