Re-Examining Bitcoin’s Price–Volume Relationship: A Time-Varying Spectral Analysis

Abstract

This study employs continuous wavelet transforms to model the relationship between Bitcoin volume and prices across time and frequency space using daily data for the period between 17 September 2014 and 10 April 2023. The results show that Bitcoin price and volume have a long-term relationship at low frequency cycles mostly during the period after 2019. A statistically insignificant relationship between the price and volume of Bitcoin is observed prior to 2019 which coincides with a time of limited regulatory oversight of Bitcoin markets globally. Positive correlation is observed in the aftermath of this period, with stronger correlation recorded during and post the period of the Covid-19 pandemic. Furthermore, the findings reveal that fluc-tuations in the Bitcoin volume tends to affect the price at higher frequency synchronizations (short-term); whereas, at lower frequencies (long-term), a feedback loop is observed, whereby the price changes lead to alterations in the volume.