Competition in the Cryptocurrency Market
34 Pages Posted: 25 Sep 2014
There are 3 versions of this paper
Competition in the Cryptocurrency Market
Competition in the Cryptocurrency Market
Date Written: September 2014
Abstract
We analyze how network effects affect competition in the nascent cryptocurrency market. We do so by examining the changes over time in exchange rate data among cryptocurrencies. Specifically, we look at two aspects: (1) competition among different currencies, and (2) competition among exchanges where those currencies are traded. Our data suggest that the winner-take-all effect is dominant early in the market. During this period, when Bitcoin becomes more valuable against the U.S. dollar, it also becomes more valuable against other cryptocurrencies. This trend is reversed in the later period. The data in the later period are consistent with the use of cryptocurrencies as financial assets (popularized by Bitcoin), and not consistent with "winner-take-all" dynamics.
Keywords: Bitcoin, cryptocurrency, network effects
JEL Classification: L17, L86
Suggested Citation: Suggested Citation
Hanna Halaburda
New York University (NYU) - Leonard N. Stern School of Business ( email )
44 West 4th Street
New York, NY NY 10012
United States
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Competition in the Cryptocurrency Market
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