Bitcoin Price Bubbles and The Factors Driving Bitcoin Price Formation

The Bitcoin, one of the most discussed event of recent times, is the first cryptocurrency to be released. Bitcoin has the biggest market capitalization in the cryptocurrencies, and it is a decentralized payment tool that cannot be controlled by any government institution. Cryptocurrencies operate on top of a decentralized network, recording and verifying transactions using a technology called Blockchain. Many bubble price formations occurred in financial markets throughout history. Cryptocurrency markets are prone to manipulation because they are not connected to any center. This study aims to to investigate the buble formations in Bitcoin (BTC) US Dollar price for the period of 11 December 2017 - 31 July 2023, and also to determine the main financial variables affecting Bitcoin prices. ARDL Bounds test proves cointegration between Bitcoin price and dependent variables. Error Correction Model determines positive connection between BTC and Nasdaq100 index. A daily change in Nasdaq100 index leads to a 0.58% increase in BTC price. Model captures also negative relationship between Volatility Index, USD Index and BTC price. No long-term relationship emerges in the results. In the long run, unique and different variables shape BTC price formation.