A Behavioural Analysis of the Bitcoin Structure and Dynamics through an Agent-Based Model

The world of cryptocurrencies is now worth about two trillion and a half of dollars with eight hundred million crypto users estimated in 2024. However, despite being engineered as a new marketplace by a group of techno-utopians, Bitcoin, the most important cryptocurrency, shows structural and dynamic attributes similar to mainstream financial markets, e.g., high centralization, concentration of power, shortermism, herd behaviour. Research on the mechanisms behind this cryptocurrency-financial system convergence is still scant and ignores possible micro-macro explanations. By integrating Social Network Analysis and Agent-Based Modelling, this study simulates the peer-to-peer transactions network of Bitcoin, framed as a complex adaptive system, showing how the micro-level shapes the macro and comparing the model results to the empirical facts derived from the antecedent analysis.

This paper seeks to reproduce the observed network features and distributions by letting agents behave according to traditional investors’ strategies, e.g., chartists, fundamentalists or ZI actors, adding network preferences and see which of them, or combination of them, endogenously replicate the empirical reality. Moreover, as Bitcoin implies both a market setting and the typical peer-to-peer interaction, we use an ad-hoc modified order book which allows to include nodes’ preferences when creating a transaction. In order to propose a realistic causal-oriented framework, we calibrate the initial wealth distribution, the evolution of nodes’ participation and transaction activity according to real network data.

Our contribution to the literature is twofold: methodologically, it integrates ABM and SNA to increase the explanatory power; substantively, it is the first study on Bitcoin to focus on the network outcomes of the transaction activity rather than being limited to price formation analysis. Lastly, it aims to explain the convergence of Bitcoin-financial markets in terms of behavioural strategies and nodes’ preferences, thus rethinking the understanding we have of Bitcoin as a “new marketplace”.