Cryptocurrencies have become one of the hottest topics in finance in recent years. Despite their fascinating appeal to the general public, the understanding of the price formation process of blockchain-based cryptocurrencies is still limited. This thesis analyzes factors influencing the price of the five cryptocurrencies Bitcoin, Ethereum, Dash, Litecoin, and Monero in the time between January 2014 and July 2017. The developed hypotheses are based on economic theory and related fields to explain cryptocurrency prices. To test the hypotheses, a Granger Causality study by estimating vector autoregressive models, vector error correction models, and autoregressive distributed lag models is conducted.

Text sample: Chapter 3 Literature Review: 3.1 The four fields of research: Cryptocurrencies are a cross-disciplinary phenomenon that touches various fields of research. In order to give a structured overview of the literature of interest, it is expedient to disentangle the complex research landscape first. Following this, it is easier to focus on the work that is most relevant for this thesis. Research in the field of cryptocurrencies has taken four main paths. Each of these paths analyzes cryptocurrencies from a different angle due to the nature of the respective scientific field. The first field comprises all the technological issues associated with cryptocurrencies. Among others, the main concern here are security aspects of the technology underlying cryptocurrencies. Eyal and Sirer (2013), for example, present a potential attack on Bitcoin which would allow a minority of colluding miners to obtain a disproportionate share of the mining revenues. They show that rational miners would join this minority until ultimately they are able to take over the whole network and thus reestablish a central authority. Others subject the security of transactions to critical scrutiny, and show that fast transactions are vulnerable regarding double-spending (Karame et al. 2012). Yet others try to improve the cryptography algorithms (Kogias et al. 2016 H. Wang et al. 2017) or analyze the public ledger in terms of decentralization (Feld et al. 2014). A large group has a look at the transactions stored in the blockchain. Ober et al. (2013) are interested in the dynamics of transactions, whereas Androulaki et al. (2013) reveal implications for user privacy when Bitcoin is used as primary currency for everyday spending in a university setting. They find that by using the public information of the blockchain it is possible to recover user profiles even when recommended privacy measures have been implemented to avoid that. Ron and Shamir (2013, 2014) conduct similar analyses with the real Bitcoin blockchain. They are able to recover the whereabouts of Silk Road profits that have not been seized by the FBI using data mining techniques. The second field relates to political, sociological, and ethical questions raised by the emergence of cryptocurrencies. Karlstrøm (2014) discusses the possible consequences for institutions in our monetary system and whether Bitcoin has inherent anarchic characteristics. Sociologically focused authors have analyzed the user base of cryptocurrencies (Bohr and Bashir 2014) and ist relation to materialism (Maurer et al. 2013). Golumbia (2015) argues that cryptocurrencies are a tool for libertarians and right-wing extremists who would like to see it undermine the authority of the government. Krugman (2013) formulates the same concern more carefully, but at least he sees the possibility of that being accurate, too. According to Yermack (2013) libertarians are indeed one of two groups interested in cryptocurrencies, however, he does not support the notion that cryptocurrencies are a 'program' for recruiting uninformed citizens into a neoliberal anti-government politic (Golumbia 2015, p. 1). Due to the implied revolution of the understanding of trust in the society Ananny (2016) and Angel and McCabe (2015) ask, whether algorithms and payment systems have an ethical component. The third area examines legal issues. This includes the status of cryptocurrencies in different jurisdictions, potential tax liabilities, anti-money laundering measures and other new illegal activities. Brito and Castillo (2013) compose a pretty solid primer for policy makers. Other authors go more into particular aspects. Bryans (2014), Christopher (2014), Stokes (2012), and Tropina (2014) all discuss implications for anti-money laundering measures. None of them sees a huge threat in cryptocurrencies, but they agree that cryptocurrencies do have potential in small-scale money laundering operations. Closely linked to the question of money laundering is the one of tax evasion. Marian (2013, p. 2) describes the mechanisms by which cryptocurrencies could replace tax havens as the weapon-of-choice for tax-evaders . Many countries' tax collecting authorities have already taken up a stance regarding the topic (cf. HM Revenue & Custom 2014 IRS 2014), which signalizes the importance of the issue. Due to infamous darknet market places such as the Silk Road or AlphaBay, which exclusively utilized cryptocurrencies to pay for their illegal goods, a lot of attention has been given to the connection of cryptocurrencies and illegal activities. There is consensus that in the early days (of Bitcoin) these illegal market places were a major driver of adoption for cryptocurrencies (Bjerg 2016 Janze 2017 J. Martin 2014 Yermack 2013). Finally, the fourth field of research tackles all kind of economic issues. There are some authors looking at investment opportunities. Bouri et al. (2017), Brière et al. (2015), Dyhrberg (2016), and Eisl et al. (2015) explore possibilities to diversify portfolios with cryptocurrencies. Due to the lack of correlation with other assets (e.g. gold) cryptocurrencies could serve as a safe haven. Furthermore, exchanges that trade cryptocurrencies are an important research subject. Cryptocurrencies are not traded on regulated markets. 9 Moore and Christin (2013) discuss the risks associated with trading on these markets. They find that 18 of 40 selected exchanges have closed, with customer account balances often wiped out. However, even in cases where the exchanges operate as expected, customers face high spreads and other handicaps. Pieters and Vivanco (2017) show that prices differ strongly across individual exchanges, which means that the law of one price is violated. This opens up potential arbitrage opportunities. Ciaian et al. (2017) explore long-run and short-run relations between a sample of Altcoins. They find indications that the Bitcoin price contributes to the price formation of some but not all Altcoins, which supports their hypothesis that cryptocurrencies are interdependent. The most important subfields of economic research for this thesis are concerned with price formation and the classification of cryptocurrencies as money. Both are treated thoroughly in the following sections.

• Kryptowährung

• Bitcoin

• Blockchain

• Distributed Ledger

• Granger Causality

• Public Attention

• Positive Feedback Trading

Lukas M. König was born in Ludwigsburg in 1991. After his undergraduate degree in Engineering Management the author focused strongly on the quantitative fields of business economics. In 2018 he graduated with distinction and earned his master's degree in Financial Management at the University of Hohenheim. Inspired by his academic time in California he developed a cross-industry affinity for modern and disruptive technologies. During his time as a university student he worked as a scientific employee at the chair of Banking and Financial Services for Prof. Dr. Burghof. Besides his participation in research on the field of modern financial markets he conducted lectures and tutorials in the courses Fundamentals of Corporate Finance and Trading & Exchanges.