Bitcoin Market Volatility Analysis Using Grand Canonical Minority Game

Abstract

In this paper we propose to use the Grand Canonical Minority Game (GCMG, a highly simplified financial market model) as a model of bitcoin market to show how the lack of an income for “miners”, similar to yield earned by bond holders, could be a structural reason for high volatility of bitcoin price in a reference currency. Coherently with present analysis, the introduction of future contracts on bitcoin would have the effect of reducing the overall market volatility.