Cryptocurrencies, tokens, and the blockchain technology upon which these platforms are built hold considerable potential for financial architectures. This column presents a dynamic asset valuation model of cryptocurrencies and tokens on blockchain-based platforms. Price dynamics in the model feature explosive growth of the user base after an initial period of dormant adoption, accompanied by a run-up of token price volatility, in line with existing evidence. The findings highlight how the value of the tokens depends on user base, the quality of the blockchain platform, and users’ expectations of future token price dynamics.
Lin William Cong, Ye Li, Neng Wang, 05 October 2018
Yukun Liu, Aleh Tsyvinski, 06 September 2018
Cryptocurrencies have received a substantial amount of attention over the past year. This column uses textbook asset-pricing methods to explore how cryptocurrency returns compare with those of traditional asset classes. Results show that cryptocurrency returns do not co-move with traditional assets, but that some cryptocurrency-specific factors – namely, momentum and investor attention – strongly predict their performance.
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