Columns (II) and (III) show that higher regulatory quality and control of corruption mitigate the positive effect of the price on users consistent with incentives to adopt Bitcoin in countries with weaker public institutions. Column (IV) shows that, consistent with the results from Table 3 and Graph 4, the relationship is more pronounced in countries with a higher male population below 35. Finally, column (V) shows the relationship between the Bitcoin price and user entry is stronger in countries with a higher inflow of remittances as a percentage of GDP. 17 Taken together, results in Tables 2, 3 and 4 suggest that the Bitcoin price has a positive and highly significant association with the entry of new users, even when controlling for other time-varying macro-economic factors or country characteristics.

To contrast the relative importance of country-level factors, panel (b) in Graph 8 again shows how much of the variation in the entry of new users (measured with the R-squared) they can explain. To ensure an adequate comparison of the Bitcoin price with country-level indicators at yearly frequency, we aggregate the data in Equation (1) to the yearly level. The dependent variable thus corresponds to the natural logarithm of the yearly average of the number of daily active users of crypto exchange apps. The independent variables correspond to the natural logarithm of the Bitcoin price, the log of the number of bank branches per 100,000 adults, real GDP, and male population below 35, plus regulatory quality, control of corruption, remittances received as percentage of GDP and a set of country-level dummies. While the price of Bitcoin explains almost 35% of the total variation, time-varying country characteristics explain less than 30% overall. Consistent with results for time-series contr

4. Exploiting exogenous variation in the Bitcoin price While our analysis so far suggests that new users are attracted by rising prices, the relationship between Bitcoin prices and the influx of new users could also operate in the other direction. As new users download apps and use their fiat money to buy Bitcoin, they might drive up the price of Bitcoin (Benetton and Compinai (2022)). While the patterns in Graph 1 suggest that user inflows tend to follow price increases with a lag of around two months, in what follows, we address the issue of reverse causality through an event study of an episode with an arguably exogenous change to the price of Bitcoin: the social unrest in Kazakhstan in 2022.

In May 2021, the Chinese government announced a crackdown on Bitcoin mining and trading in China. Since Chinese miners had been responsible for up to threequarters of all mining at its peak, this policy move had a large and swift effect on Bitcoin mining capacity. Bitcoin mining equipment was subsequently exported from China and miners eventually set up shop in other countries with cheap and abundant energy supplies. One such location was neighbouring Kazakhstan, which had large, vacant warehouses and factories well-suited to house mining operations, as well as cheap energy from coal (70% of electricity production) and natural gas. In a few months, Kazakhstan became one of the worlds most important countries for mining Bitcoin.