Bitcoin price and its marginal cost of production: support for a fundamental value

Adam S. Hayes*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

73 Scopus citations


This study back-tests a marginal cost of production model proposed to value the digital currency Bitcoin. Results from both conventional regression and vector autoregression (VAR) models show that the marginal cost of production plays an important role in explaining Bitcoin prices, challenging recent allegations that Bitcoins are essentially worthless. Even with markets pricing Bitcoin in the thousands of dollars each, the valuation model seems robust. The data show that a price bubble that began in the Fall of 2017 resolved itself in early 2018, converging with the marginal cost model. This suggests that while bubbles may appear in the Bitcoin market, prices will tend to this bound and not collapse to zero.

Original languageAmerican English
Pages (from-to)554-560
Number of pages7
JournalApplied Economics Letters
Issue number7
StatePublished - 16 Apr 2019
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2018, © 2018 Informa UK Limited, trading as Taylor & Francis Group.


  • Bitcoin
  • bubbles
  • cost of production
  • cryptocurrency
  • model testing
  • valuation model


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