On the determinants of bitcoin returns: A LASSO approach

Abstract

We examine the significance of twenty-one potential drivers of bitcoin returns for the period 2010 to 2017 (2,533 daily observations). Within a LASSO framework, we examine the effects of factors such as stock market returns, exchange rates, gold and oil returns, FED’s and ECB’s rates and internet trends on bitcoin returns for alternate time periods. Search intensity and gold returns emerge as the most important variables for bitcoin returns.