Cryptocurrencies: Price Determinants and Similarities to the Stock Market

In this thesis I partly replicate earlier research on cryptocurrencies and its return drivers. As the cryptocurrency market is relatively new and no stable equilibrium has been found, the factors of interest to returns are buzz and innovation. The buzz-factors are shown to significantly influence weekly returns. Search trends affect returns positively while Wikipedia page view numbers affect returns positiviely in one week and negatively the week thereafter, signaling investor overreactions. Innovation is an important factor in the technological development of a cryptocurrency but the measure used is not sufficiently capturing the full development and is thus insignificantly affecting weekly returns. Supply growth and liquidity drive returns negatively as they do in traditional financial instruments. Furthermore, unlike the traditional stock market, no particular trading days show above average returns. The findings on momentum in returns show signs of inexperienced investors through patters of over- and under-reaction to price actions of up to thirteen days.