The Impact of Unsystematic Factors on Bitcoin Value

Round 1

Reviewer 1 Report

JRFM: The Impact of Unsystematic Factors on Bitcoin Value

The paper examines the impact of unsystematic factors on the value of Bitcoin. The empirical results show that the considered unsystematic factors, Stock-to-Flow index (S2F), and information on bitcoin prices are directly correlated with Bitcoin value. The authors further confirm the strong influence of non-technical information that are directly linked with the BTC, and they indicate the relevance of the S2F and S2FX models and show a strong impact of (half)information on the value of cryptocurrencies.

The subject of the paper is interesting, the empirical model is appropriately conducted, and the results are well presented.  However, the paper requires some improvements to enhance its quality and position within related studies that consider the factors affecting bitcoin prices. My comments are below.

1. The introduction section is slow. The aim of the paper can be formulated in one place and in more clear way (this should be the case in the abstract too). The contribution of the paper can be better highlighted, as compared to the existing literature (see my below comment).
2. In a related point, the authors need to reinforce the literature part in the introduction in order to better position their analyses as compared to existing studies on the factors affecting Bitcoin prices. In that sense, some related papers are missing such as the ones considering (1) technical analysis (e.g., Bitcoin technical trading with artificial neural network, Physica A: Statistical Mechanics and its Applications; The profitability of technical trading rules in the Bitcoin market, Finance Research Letters); (2) trading volume (e.g., Can volume predict Bitcoin returns and volatility? A quantiles-based approach, Economic Modelling);  and (3) other economic and financial factors as well as the market efficiency (e.g., Testing for asymmetric nonlinear short- and long-run relationships between Bitcoin, aggregate commodity and gold prices, Resources Policy; Asymmetric efficiency of cryptocurrencies during COVID19, Physica A - Statistical Mechanics and its Applications). Those papers can be used along with the already cited ones to help position the paper within the related literature, and importantly to discuss your findings and their added value.
3. What is the difference between Figure 2 and Figure 3.
4. Some of the contents of Table 1 can be improved along with its format.
5. How your arguments and results can be understood in light of the claims of Cordeiro (2020).
6. In the conclusion section, the authors should go beyond summarizing the paper. Especially, the policy implications should be more discussed and elaborated for the sake of practitioners in the cryptocurrency markets.

7.Make sure that all cited papers are presented in the reference list and vice-versa.

8.Make the figures and tables more self-explanatory and improve the format of tables.

Good luck with the revision.

Author Response

Point 1: The introduction section is slow. The aim of the paper can be formulated in one place and in more clear way (this should be the case in the abstract too). The contribution of the paper can be better highlighted, as compared to the existing literature (see my below comment)

Response 1: We changed and thus made the aim and contribution of the research clear: “The aim of the research is to investigate the influence of non-systematic factors on the value of decentralized virtual cryptocurrency Bitcoin (BTC), ie to investigate the reasons for significant fluctuations in demand values BTC”

 

Point 2: In a related point, the authors need to reinforce the literature part in the introduction in order to better position their analyses as compared to existing studies on the factors affecting Bitcoin prices. In that sense, some related papers are missing such as the ones considering (1) technical analysis (e.g., Bitcoin technical trading with artificial neural
network, Physica A: Statistical Mechanics and its Applications; The profitability of technical trading rules in the Bitcoin market, Finance Research Letters); (2) trading volume (e.g., Can volume predict Bitcoin returns and volatility? A quantiles-based approach, Economic Modelling); and (3) other economic and financial factors as well as the market efficiency (e.g., Testing for asymmetric nonlinear short- and long-run relationships between Bitcoin, aggregate commodity and gold prices, Resources Policy; Asymmetric efficiency of cryptocurrencies during COVID19, Physica A - Statistical Mechanics and its Applications). Those papers can be used along with the already cited ones to help position the paper within the related literature, and importantly to discuss your findings and their added value.

Response 2: Recommended literature studied:

• Masafumi Nakano, Akihiko Takahashi, Soichiro Takahashi: Bitcoin technical trading with artificial neural network, Physica A: Statistical Mechanics and its Applications,

Volume 510, 2018, Pages 587-609, ISSN 0378-4371

• BalcilarMehmet,  Bouri Elie,  Gupta Rangan, Roubaud David: Can Volume Predict Bitcoin Returns and Volatility? A Quantiles-Based Approach Economic Modelling, 2017, vol. 64, issue C, 74-81

In the BTC trading study, the authors (Masafumi Nakano, Akihiko Takahashi, Soichiro Takahashi, 2018, p. 587) and (M Balcilar, E Bouri, R Gupta, D Roubaud, 2017, p. 74) conduct sensitivity analyzes, but investigate a relatively short time trading for several months and do not investigate the impact of (half) information on the movement of the market value of BTC.

 

Point 3: What is the difference between Figure 2 and Figure 3

Response : Explanation: Following the 2019 S2F model (Graf 2), the S2FX Model (Graf3) was developed in 2020 in another attempt to explain market value oscillations in relation to the S2F price projection model

 

 

Point 4: Some of the contents of Table 1 can be improved along with its format

Response: Explanations in column names have been added and a new table format has been created.

 

Point 5: How your arguments and results can be understood in light of the claims of Cordeiro (2020).

Response: Clarification added: Contrary to Cordeiro's opinion, it is evident (Graph 2) that in the past ten years BTC strongly follows the value of a certain S2F and this paper investigates the reasons for occasional oscillations and finds them in (half) information appearing on the market.

 

 

Point 6: in the conclusion section, the authors should go beyond summarizing the paper. Especially, the policy implications should be more discussed and elaborated for the sake of practitioners in the cryptocurrency markets

Response : The structure of the conclusion was changed as observed

 

 

Point 7: Make sure that all cited papers are presented in the reference list and vice-versa.

Response : checked, amended or supplemented as needed!

 

 

Point 8: Make the figures and tables more self-explanatory and improve the format of tables.

Response :

Table 1: Table name changed, Table format supplemented and changed

Author Response File: Author Response.docx

Reviewer 2 Report

This manuscript is not well written and structured:

1. It is not clear what can be the novelty and/or contribution as there are several other papers on the same subject?
2. The manuscript aims/objectives should be more clearly presented.
3. There is no clear focus in the literature presentation and the hypothesis development, including explaining the importance of different variables to be included in the empirical analysis.
4. Graphs 1, 2, and 3 (probably Figure 1, 2, and 3) lack shortcomings in their clarity and accuracy. For example, are the values presented in nominal or constant values? What are the units of measures? There are missing more clear explanations and Legends.
5. Section 4. is titled “Results and Discussion”, but already some results are presented in section 3?
6. Section 3 contains only subsection 3.1: Is there a need for only a single subsection that cannot be linked with the main title of section 3?
7. What can be the study implications?
8. What can be the study limitations?
9. The final 5. section Conclusions repeated the results, but more importantly, what can be the main message of the manuscript?
10. There are typos and other mistakes. For example, Funding: “please add.”? Some polishing and proofreading of the manuscript would be welcome.

Author Response

Response to Reviewer 2 Comments

 

 

Point 1: It is not clear what can be the novelty and/or contribution as there are several other papers on the same subject?

Response 1:

We have added to the paper the statement: In the BTC trading study, the authors conduct sensitivity analyzes, but investigate a relatively short time trading for several months and do not investigate the impact of (half) information on the movement of the market value of BTC.

 

Point 2: The manuscript aims/objectives should be more clearly presented.

Response 2: The goals of scientific work are more clearly set: The aim of the research was to investigate the influence of non-systematic factors on the value of decentralized virtual cryptocurrency BTC) and to investigate the reasons for significant oscillations of demand values in relation to S2F and S2FX model and thus confirm the reliability of these models in estimating BTC value.

 

Point 3: There is no clear focus in the literature presentation and the hypothesis development, including explaining the importance of different variables to be included in the empirical analysis.

Response 3: The content of the paper has been reorganized and previous research and our own research have been more clearly highlighted

 

Point 4: Graphs 1, 2, and 3 (probably Figure 1, 2, and 3) lack shortcomings in their clarity and accuracy. For example, are the values presented in nominal or constant values? Whatare the units of measures? There are missing more clear explanations and Legends.

 

Response 4: Figures 2,3 - added values and necessary clarifications:

There are two series on this graph: 1) Price end of day: Colored dots are representing end of day actual price (Y axis right side) in selected currency. Different colors are there to indicate how many days are left until next halving event. You can see color scale presented vertically on the right side of the chart. 2) Stock to flow 463 days: It has already been said that stock to flow is relationship between total stock against yearly production. Then stock to flow value is calculated.

 

Point 5: Section 4. is titled “Results and Discussion”, but already some results are presented in section 3?

Response 5: An appropriate reorganization of the content of the paper was made!

 

Point 6: Section 3 contains only subsection 3.1: Is there a need for only a single subsection that cannot be linked with the main title of section 3?

Response 6: An appropriate reorganization of the content of the paper was made!

 

Point 7: What can be the study implications?

Response 7: Further research should completely exclude the impact of other systematic and unsystematic factors on the value of the cryptocurrency.

 

Point 8: What can be the study limitations?

Response 8: Limitations in the paper originate from the complexity of the environment itself with regard to the impact on the value of cryptocurrencies, relatively new and insufficiently in-vestigated S2F and S2FX methodology, numerous systematic and unsystematic factors that could potentially affect the BTC value, and anonymity of the authors of the above-mentioned model.

 

Point 9: The final 5. section Conclusions repeated the results, but more importantly, what can be the main message of the manuscript?

Response 9: An appropriate reorganization of the content of the paper was made!

The research theoretically confirmed that the development of the financial market is a precondition for verified trends, but that it is necessary to continue the research to determine to what extent the developed i.e., highly capitalised financial market ensures constant growth of Bitcoin in accordance with the defined methods and influences.

 

 

Point 10: There are typos and other mistakes. For example, Funding: “please add.”? Some polishing and proofreading of the manuscript would be welcome.

Response 10: The paper is additionally proofread!

 

 

Author Response File: Author Response.docx

Reviewer 3 Report

The paper is really interesting and has a good publication potential, but some aspects need to be included and further developed.

The paper would benefit from professional proofread, as the authors seem not to be very proficient in English and they repeat some of the words... like "The 15 limitations of this paper are limited possibilities of examination of th" ... limitations is used twice here

Introduction

In the first paragraph of your introduction...it would be really nice if you could cite at least one reference. Maybe more references would be better.

If you speak of the financial crisis from 2008 and the present pandemic, it would be more than appropriate to cite some references. The first cited reference is from ... 2013. Nice. Cryptocurrency exists indeed since several years, but the discussions about that are still recent. So ... it would be nice if you could really develop on this and add more relevant references

The proportion of recent peer reviewed articles is quite low. The financial behavior of individual investors during the COVID-19 confinement and green financial behavior should be covered and thus such Scopus Q1 sources should be cited: Priem, R. (2021). “An Exploratory Study on the Impact of the COVID-19 Confinement on the Financial Behavior of Individual Investors,” Economics, Management, and Financial Markets 16(3): 9–40. doi: 10.22381/emfm16320211. Ionescu, L. (2021). “Transitioning to a Low-Carbon Economy: Green Financial Behavior, Climate Change Mitigation, and Environmental Energy Sustainability,” Geopolitics, History, and International Relations 13(1): 86–96. doi: 10.22381/GHIR13120218. Ionescu, L. (2020). “The Economics of the Carbon Tax: Environmental Performance, Sustainable Energy, and Green Financial Behavior,” Geopolitics, History, and International Relations 12(1): 101–107. doi:10.22381/GHIR121202010

 "More than two and a half millennia have passed since the first official currency" ok ...but please cite this information. 

"China, which is basically a banknote issuer’s" from where do you know that?

"digitalised decentralised finance platform (DeFi) is an attempt" from where do you know that? Please cite

Please include references every where if the ideas are not yours and-or if some information is presented which do not reflect the general truth.

 "importance of the BTC is constantly growing. There are numerous researches" ok, but give examples, otherwise I do not believe you

The introduction is to general and toooooo long. It should be better focused on issues like: research gap, theory behind the paper, research question, explanation of how the paper is original, explanation of how the research scope is implemented in the paper. The last paragraph should present the next sections of the paper.

Lit review

"rkets, such as the Efficient Market Hypothe-106 sis." you need to cite that

In this section there are lots of paragraphs without proper citations. Every paragraph of the lit review should have at lease one citation.

The paragraphs are tooooo short. You need to extend the paragraphs.

This references "Mishkin and Eakins, 2003" is cited to often. Please also rely on other more recent references.

The literature review is not structured very well, i.e. it is not clear what the key concepts are. 

Research methodology

What do the figures represent? From where are the figures taken?

I find the results and the discussions really poor

Conclusions are also quite weak. References should not be cited in this section. This section should contain theoretical implications; managerial contributions; limitations; future research perspectives. 

 

Author Response

Response to Reviewer 3 Comments

 

 

Point 1: In the first paragraph of your introduction...it would be really nice if you could cite at least one reference. Maybe more references would be better. If you speak of the financial crisis from 2008 and the present pandemic, it would be more than appropriate to cite some references. The first cited reference is from ... 2013. Nice. Cryptocurrency exists indeed since several years, but the discussions about that are still recent. So ... it would be nice if

you could really develop on this and add more relevant references

The proportion of recent peer reviewed articles is quite low. The financial behavior of individual investors during the COVID-19 confinement and green financial behavior should be covered and thus such Scopus Q1 sources should be cited:

 

• Priem, R. (2021). “An Exploratory Study on the Impact of the COVID-19 Confinement on the Financial Behavior of Individual Investors,” Economics, Management, and Financial Markets 16(3): 9–40. doi: 10.22381/emfm16320211.

 

• Ionescu, L. (2021). “Transitioning to a Low Carbon Economy: Green Financial Behavior, Climate Change Mitigation, and Environmental Energy Sustainability,” Geopolitics, History, and International Relations 13(1): 86–96. doi: 10.22381/GHIR13120218.

 

• Ionescu, L. (2020). “The Economics of the Carbon Tax: Environmental Performance, Sustainable Energy, and Green Financial Behavior,” Geopolitics, History, and International Relations 12(1):101–107. doi:10.22381/GHIR121202010

Response 1: The proposed articles were studied and cited in the introduction to the paper

• Priem, R. (2021). “An Exploratory Study on the Impact of the COVID-19 Confinement on the Financial Behavior of Individual Investors,” Economics, Management, and Financial Markets 16(3): 9–40. doi: 10.22381/emfm16320211.
• Allen, Franklin, and Carlleti, Elena, (2010). An Overview of the Crisis: Causes, Consequences and Solutions, Urban Economics & Regional Studies eJournal. https://doi.org/10.1111/j.1468-2443.2009.01103.x
• Ding, Wenzhi, Levine, Ross., Lin, Chen and Xie, Wensi), (2020). Corporate Immunity to the COVID-19 Pandemic, Working Paper 27055, Available online: from https://www.nber.org/papers/w27055
• Ozili, Peterson, and Arun Thankom, (2020). Spillover of COVID-19: Impact on the Global Economy, Available online: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3562570
• Šonje, Velimir, Kotarski, Kristijan (2020). Korona ekonomika: Pet jahača apokalipse, Zagreb: Arhivanalitika

 

 

Point 2:"More than two and a half millennia have passed since the first official currency" ok ...but please cite this information.

"China, which is basically a banknote issuer’s" from where do you know that?

Response 2: Corrected

 

 

Point 3: "digitalised decentralised finance platform (DeFi) is an attempt" from where do you know that? Please cite Please include references every where if the ideas are not yours and-or if some information is presented which do not reflect the general truth.

 

 

"importance of the BTC is constantly growing. There are numerous researches" ok, but give examples, otherwise I do not believe you

Response 3: Corrected

 

 

 

Point 4: The introduction is to general and toooooo long. It should be better focused on issues like: research gap, theory behind the paper, research question, explanation of how the paper is original, explanation of how the research scope is implemented in the paper. The last paragraph should present the next sections of the paper.

Response 4: An appropriate reorganization of the content of the paper was made! The introduction is shortened! The last paragraph present the next sections of the paper: “The following chapters explain in detail the importance of the S2F and S2FX methodology for determining BTC values. In the chapter results and discussions, the influence of the so-called (semi) information on the market value of BTC. Deviations of the market value of BTC in relation to the value determined by the S2F model have been analyzed through a number of cases in the last ten years.”

 

Point 5: Lit review "markets, such as the Efficient Market Hypothe-106 sis." you need to cite that In this section there are lots of paragraphs without proper citations. Every paragraph of the lit review should have at lease one citation.

Response 5: Corrected

 

 

Point 6: The paragraphs are tooooo short. You need to extend the paragraphs.

Response 6: Corrected

 

Point 7: This references "Mishkin and Eakins, 2003" is cited to often. Please also rely on other more recent references.

Response 7: Corrected and added some new authors and research

 

Point 8: The literature review is not structured very well, i.e. it is not clear what the key concepts are.Research methodology

Response 8: Corrected

 

Point 9: What do the figures represent? From where are the figures taken?

Response 9: Explained in text

 

Point 10: I find the results and the discussions really poor Conclusions are also quite weak. References should not be cited in this section. This section should contain theoretical implications; managerial contributions; limitations; future research perspectives.

Response 10:

An appropriate reorganization of the content of the paper was made!

The research theoretically confirmed that the development of the financial market is a precondition for verified trends, but that it is necessary to continue the research to determine to what extent the developed i.e., highly capitalised financial market ensures constant growth of Bitcoin in accordance with the defined methods and influences.

Author Response File: Author Response.docx

Round 2

Reviewer 1 Report

The authors have submitted an enhanced version of the paper that addresses  most of my comments. However, I still have a concern regarding the recognition of previous studies on the factors affecting Bitcoin/cryptocurrency prices. Therefore, my comment # 2 deserves a better and more thorough response.   

Author Response

Comments and Suggestions for Authors

The authors have submitted an enhanced version of the paper that addresses most of my comments. However, I still have a concern regarding the recognition of previous studies on the factors affecting Bitcoin/cryptocurrency prices. Therefore, my comment # 2 deserves a better and more thorough response.  

Answer: We added the most relevant studies

Balcilar, Mehmet, Bouri, Elie, Gupta Rangan and Roubaud, David (2017). Can Volume Predict Bitcoin Returns and Volatility? A Quantiles-Based Approach. Economic Modelling, 64(C), 74-81(Barbić, 2010) Barbić, Tajana. (2010). Pregled razvoja hipoteze efikasnog tržišta. Privredna Kretanja i Ekonomska Politika 20(124), 29–61

Baur, Dirk G., Dimpfl, Thomas and Kuck, Konstantin. (2017): Bitcoin, gold and the US dollar –A replication and extension. Finance Research Letters, Elsevier, vol. 25(C), pages 103–110. DOI: 10.1016/j.frl.2017.10.012

Bjerg, Ole, 2016. How is Bitcoin Money? Theory, Culture & Society, 33(1), .53–72.

Bouoiyour, Jamal and Selmi, Refk. (2014): What bitcoin looks like? MPRA Paper No. 58091. Available online: http://mpra.ub.uni-muenchen.de/58091/

Cardero, Niko. (2020). Why the Stock-to-Flow Bitcoin Valuation Model Is Wrong. https://www.coindesk.com/markets/2020/06/30/why-the-stock-to-flow-bitcoin-valuation-model-is-wrong/

Carney, Mark. (2021). Finding value in values. Available online: https://www.bnymellon.com/content/dam/bnymellon/documents/pdf/perspectives/mark_carney-finding_value_in_values.pdf.coredownload.pdf

Dyhrberg, Anne Haubo. (2015). Bitcoin, Gold and the Dollar –a GARCH Volatility Analysis, Finance Research Letters. 16. 85-92. https://doi.org/10.1016/j.frl.2015.10.008

Kavvadias, Gerasimos. (2017). What drives the value of cryptocurrencies? A time series analysis of bitcoin, Master Thesis. Tilburg University, Available online: http://arno.uvt.nl/show.cgi?fid=145139

Kim, Young Bin, Kim, Jun Gi, Kim,Wook, Kim, Im, Jae Ho, Kim, Tae Hyeong, Kang, Shin Jin, Kim, Chang Hun (2016). Predicting fluctuations in cryptocurrency transactions based on user comments and replies. PLoS ONE 11(8), e0161197. https://doi.org/10.1371/journal.pone.0161197

Kristoufek , Ladislav. (2014). What are the main drivers of the Bitcoin price? Evidence from wavelet coherence analysis, Available online: https://arxiv.org/pdf/1406.0268.pdf

Letra, Ivo. (2016). What drives cryptocurrency value? A volatility and predictability analysis. Master’s Thesis. Lisbon school of economics & management, Available online: https://www.repository.utl.pt/bitstream/10400.5/12556/1/DM-IJSL-2016.pdf

 Masafumi, Nakano, Akihiko, Takahashi, Soichiro, Takahashi: Bitcoin technical trading with artificial neural network, Physica A: Statistical Mechanics and its Applications, Volume 510, 2018, Pages 587–609, ISSN 0378-4371(Matta et al., 2015), Matta, Martina, Lunesu, Ilaria, Marchesi Michele. (2015). Bitcoin spread prediction using social and web search media. Available online: http://ceur-ws.org/Vol-1388/DeCat2015-paper3.pdf

Mora, Camilo, Rollins, Randi, L., Taladay, Katie, Kantar, Michael B., Chock, Mason K., Shimada Mia, & Franklin Erik C. (2018). Bitcoin emissions alone could push global warming above 2°C, Nature Climate Change 8, 931–933. https://doi.org/10.1038/s41558-018-0321-8

Panagiotidis, Theodore, Stengos Thanasis and Vravosinos Orestis (2019). A Principal Component-Guided Sparse Regression Approach for the Determination of Bitcoin Returns. Journal of Risk and Financial Management 13(33). http://doi.org/10.3390/jrfm13020033

Polasik, Michal, Piotrowska, Anna Iwona, Wisniewski, Tomasz Piotr, Kotkowski, Radoslaw and Lightfoot, Geoffrey. (2014). Price Fluctuations and the Use of Bitcoin: An Empirical Inquiry. Available online: https://www.ecb.europa.eu/pub/conferences/shared/pdf/retpaym_150604/polasik_paper.pdf. https://doi.org/10.1080/10864415.2016.1061413

Poyser, Obryan. (2017). Exploring the determinants of Bitcoin’s price: an application of Bayesian Structural Time Series,                Available online: https://arxiv.org/ftp/arxiv/papers/1706/1706.01437.pdf

Seys, Jens and Decaestecker, Kjartan (2016). The Evolution of Bitcoin Price Drivers: Moving Towards Stability? Master Thesis. University of Ghent, Available online: https://libstore.ugent.be/fulltxt/RUG01/002/273/510/RUG01-002273510_2016_0001_AC.pdf  

Yoo, Soonduck. (2021). How to Design Cryptocurrency Value and How to Secure Its Sustainability in the Market. Journal of Risk and Financial Management 14(210). https://doi.org/10.3390/jrfm14050210

 

 

 

Reviewer 2 Report

The manuscript needs polishing and proofreading. In addition, Figures need additional legends and explanations regarding the variables, their meanings, and units of measures.

Author Response

 

Point 1: The manuscript needs polishing and proofreading.

 

Response 1:

 

The manuscript was proofread again.

 

 

Point 2: Figures need additional legends and explanations regarding the variables, their meanings, and units of measures.

 

Response 2:

 

Figure 1 explanations:

“Within the Wyckoff method (Figure 1), there are five phases:

Phase A means stopping the previous downward trend. Up to this point, the offer was dominant. This signals preliminary support (PS) and sales peak (SC). Automatic purchase and active purchase then cause automatic increase (AR). SC and AR denote the trading range of the accumulation phase.

Phase B - The period in which the assets are accumulated.

Phase C - The stock price goes through a decisive test of the remaining offer.

Phase D - This is a passing phase and is the last opportunity for investors and traders to buy at lower prices, and finally there is last point support (LPS). This is the highest low before the market breaks through the resistance levels. Signs of support (SOS) occur where resistance prices used to be.

Phase E - Indicates an increase in market demand and an upward trend.”

 

Figure 2 explanations:

Painted line: market price at the end of the day

Thin line: S2F value

 

Figure 3 explanations:

Painted line: market price at the end of the day

Thin line: S2FX value

 

Reviewer 3 Report

As the authors made substantial changes and improvements to their manuscript, this new version can now be accepted. Congratulations and best luck with the research

Author Response

Answer:  Thank you very much.