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The evolving liaisons between the transaction networks of Bitcoin and its price dynamics


Bovet, Alexandre; Campajola, Carlo; Mottes, Francesco; Restocchi, Valerio; Vallarano, Nicolò; Squartini, Tiziano; Tessone, Claudio (2019). The evolving liaisons between the transaction networks of Bitcoin and its price dynamics. arXiv.org 1907.03577, University of Zurich.

Abstract

Cryptocurrencies are distributed systems that allow exchanges of native tokens among par-ticipants, or the exchange of such tokens for fiat currencies in markets external to these public ledgers. The availability of their complete historical bookkeeping opens up the possibility of understanding the relationship between aggregated users’ behaviour and the cryptocur-rency pricing in exchange markets. This paper analyses the properties of the transaction network of Bitcoin. We consider four different representations of it, over a period of nine years since the Bitcoin creation and involving 16 million users and 283 million transactions. By analysing these networks, we show the existence of causal relationships between Bitcoin price movements and changes of its transaction network topology. Our results reveal the in-terplay between structural quantities, indicative of the collective behaviour of Bitcoin users, and price movements, showing that, during price drops, the system is characterised by a larger heterogeneity of nodes activity.

Abstract

Cryptocurrencies are distributed systems that allow exchanges of native tokens among par-ticipants, or the exchange of such tokens for fiat currencies in markets external to these public ledgers. The availability of their complete historical bookkeeping opens up the possibility of understanding the relationship between aggregated users’ behaviour and the cryptocur-rency pricing in exchange markets. This paper analyses the properties of the transaction network of Bitcoin. We consider four different representations of it, over a period of nine years since the Bitcoin creation and involving 16 million users and 283 million transactions. By analysing these networks, we show the existence of causal relationships between Bitcoin price movements and changes of its transaction network topology. Our results reveal the in-terplay between structural quantities, indicative of the collective behaviour of Bitcoin users, and price movements, showing that, during price drops, the system is characterised by a larger heterogeneity of nodes activity.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Language:English
Date:8 July 2019
Deposited On:24 Sep 2019 14:19
Last Modified:24 Jan 2020 08:20
Series Name:arXiv.org
Number of Pages:19
ISSN:2331-8422
OA Status:Green
Free access at:Publisher DOI. An embargo period may apply.
Official URL:https://arxiv.org/abs/1907.03577
Other Identification Number:merlin-id:18453

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