US macroeconomic determinants of Bitcoin
-
DOIhttp://dx.doi.org/10.21511/imfi.21(2).2024.19
-
Article InfoVolume 21 2024, Issue #2, pp. 240-252
- 324 Views
-
126 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
This study aims to determine the impact of macroeconomic variables on bitcoin prices in the United States. Bitcoin is one of the cryptocurrencies that has the highest price and the most users in the United States in recent years. This study uses monthly data on inflation, interest rates, USD/EUR rates, gold prices, and bitcoin prices. To achieve the objectives of this study, Dynamic Conditional Correlation (DCC) and Multivariate Generalized Autoregressive Conditional Heteroscedasticity (MGARCH) were used. The results showed that there is a negative and significant relationship between the variables of inflation, interest rates, and USD/EUR rates affecting the price of Bitcoin in that period. Conversely, there is a positive and significant relationship between the price of gold and the price of Bitcoin in the United States during that period. An in-depth understanding of how macroeconomic factors such as inflation, interest rates and the USD/EUR rates affect Bitcoin price is key to making smart investment decisions in an increasingly complex crypto market. The findings of this analysis confirm that the significant relationship between macroeconomic variables and Bitcoin price provides deeper insights for investors to anticipate market movements and design adaptive investment strategies.
- Keywords
-
JEL Classification (Paper profile tab)E22, E44
-
References54
-
Tables3
-
Figures1
-
- Figure 1. USD/BTC price fluctuations 2016–2022
-
- Table 1. Data stationarity test (Augmented Dickey-Fuller)
- Table 2. Multicollinearity test
- Table 3. DCC-MGARCH
-
- Aboura, S. (2022). A Note on the Bitcoin and Fed Funds Rate. Empirical Economics, 63(5), 2577-2603.
- Afzal, F. J. & Haiying, P. (2020). Evaluating The Effectiveness of Capm and Apt for Risk Measuring and Assets Pricing. Financial Risk and Management Reviews.
- Aielli, G. P. (2011). Dynamic conditional correlation: On properties and estimation. SSRN Electronic Journal.
- Al-Yahyaee, K. H., Rehman, M. U., Mensi, W., & Al-Jarrah, I. M. W. (2019). Can Uncertainty Indices Predict Bitcoin Prices? A Revisited Analysis Using Partial and Multivariate Wavelet Approaches. North American Journal of Economics and Finance.
- Andrean, G. (2020). Determinant of the Bitcoin Prices as Alternative Invesment in Indonesia. Indicators: Journal of Economic and Business, 1(1), 22-29.
- Astuti, R. D., & Fazira, N. (2018). The Effect of Cryptocurrency on Exchange Rate of China: Case Study of Bitcoin. Munich Personal Repec Archive, 93052.
- Bala, D. A., & Takimoto, T. (2017). Stock Markets Volatility Spillovers During Financial Crises: A DCC-MGARCH With Skewed-T Density Approach. Borsa Istanbul Review.
- Bas, T., Malki, I., & Sivaprasad, S. (2024). Connectedness between central bank digital currency index, financial stability and digital assets. Journal of International Financial Markets, Institutions and Money, 92(July 2023), 101981.
- Baur, D. G., Dimpfl, T., & Kuck, K. (2018). Bitcoin, gold, and the US dollar – A replication and extension. Finance Research Letters, 25, 103-10.
- Benetton, M., & Compiani, G. (2024). Investors’ beliefs and cryptocurrency prices. The Review of Asset Pricing Studies, raad015.
- Brière, M., Oosterlinck, K., & Szafarz, A. (2015). Virtual currency, tangible return: portfolio diversification with bitcoin. Journal of Asset Management, 16, 365-73.
- Celik, S. (2012). The More Contagion Effect on Emerging Markets: The Evidence of DCC-GARCH Model. Economic Modelling, 29(5), 1946-1959.
- Chevallier, J. (2012). Time-Varying Correlations in Oil, Gas and CO2 Prices: An Application Using BEKK, CCC and DCC-MGARCH Models. Applied Economics.
- Chiang, T. C., Jeon, B. N., & Li, H. (2007). Dynamic Correlation Analysis of Financial Contagion: Evidence from Asian Markets. Journal of International Money and Finance, 26(7), 1206-1228.
- Choi, S., & Shin, J. (2022). Bitcoin: An Inflation Hedge But Not A Safe Haven. Finance Research Letters.
- Chu, J., Chan, S., Nadarajah, S., & Osterrieder, J. (2017). GARCH modelling of cryptocurrencies. Journal of Risk and Financial Management, 10, 17.
- Das, P. (2019). Econometrics in Theory and Practice: Analysis of Cross Section, Time Series and Panel Data with Stata 15.1. In Econometrics in Theory and Practice: Analysis of Cross Section, Time Series and Panel Data with Stata 15.1.
- Dyhrberg, A. H. (2016). Hedging capabilities of bitcoin. Is it the virtual gold? Finance Research Letters, 16, 139-44.
- Elbannan, M. A. (2014). The Capital Asset Pricing Model: An Overview of the Theory. International Journal of Economics and Finance, 7(1), 216-228.
- Farhi, E., & Maggiori, M. (2018). A model of the international monetary system. The Quarterly Journal of Economics, 133(1), 295-355.
- Forbes, K. J., & Rigobon, R. (2002). No Contagion, Only Interdependence: Measuring Stock Market Comovements. Journal of Finance, 57(5), 2223-2261.
- Ge, Z., & Zhou, C. (2019). Bitcoin Price Trends and Influencing Factors. Hmeet, 122-128.
- Giudici, G., Milne, A., & Vinogradov, D. (2020). Cryptocurrencies: market analysis and perspectives. Journal of Industrial and Business Economics, 47(1), 1-18.
- Guizani, S., & Nafti, I. K. (2019). The Determinants of Bitcoin Price Volatility: An Investigation with ARDL Model. Procedia Computer Science, 164, 233-238.
- Harooni, M. U., & Alvan, A. (2023). The Relationship Between Bitcoin Price and Macroeconomic.
- Havidz, S. A. H., Karman, V. E., & Mambea, I. Y. (2021). Is Bitcoin Price Driven by Macro-Financial Factors and Liquidity? A Global Consumer Survey Empirical Study. Vilniaus Universiteto Leidykla, 24.
- International Monetary Fund. (2022). The Money Revolution. Finance & Development IMF, September, 42-54.
- Jareño, F., González, M. de la O., Tolentino, M., & Sierra, K. (2020). Bitcoin and gold price returns: A quantile regression and NARDL analysis. Resources Policy, 67(March).
- Katsiampa, P. (2017). Volatility estimation for bitcoin: a comparison of GARCH models. Economics Letters, 158, 3-6.
- Ko, H., Son, B., & Lee, J. (2024). Portfolio insurance strategy in the cryptocurrency market. Research in International Business and Finance, 67, 102135.
- Krakower, R. H. (2023). Exploring The Relationship Between Bitcoin and Inflation Expectations: An Empirical Analysis.
- Kusumastuty, C., Wulandari, D., Narmaditya, B., & Kamaludin, M. (2019). Do Monetary Variables Affect to Cryptocurrency Price? Lesson From Indonesia. Jurnal Ekonomi Dan Studi Pembangunan, 11(2), 131-142.
- Lai, T., & Stohs, M. H. (2021). CAPM And Asset Pricing. International Journal of Business, November.
- Li, J.-P., Naqvi, B., Rizvi, S. K. A., & Chang, H.-L. (2021). Bitcoin: The Biggest Financial Innovation of Fourth Industrial Revolution and a Portfolio’s Efficiency Booster. Technological Forecasting & Social Change.
- Li X, & Wang, C. A. (2017). The technology and economic determinants of cryptocurrency exchange rates: the case of bitcoin. Decision Support Systems, 95, 49-60.
- Mirzayi, S., & Mehrzad, M. (2017). Bitcoin, An SWOT Analysis. 2017 7th International Conference on Computer and Knowledge Engineering, ICCKE.
- Mishkin, F. S. (2016). The Economics of Money, Banking, and Financial Markets. Columbia University.
- Nguyen, T., Nguyen Thanh, B., Nguyen, K., & Pham, H. (2019). Asymmetric monetary policy effects on cryptocurrency markets. Research in International Business and Finance, 48(C), 335-339.
- Oad Rajput, S. K., Soomro, I. A., & Soomro, N. A. (2020). Bitcoin sentiment index, Bitcoin performance and US Dollar Exchange Rate. Journal of Behavioral Finance, 23(2), 150-165.
- Parino, F., Beiró, M. G., & Gauvin, L. (2018). Analysis of the Bitcoin Blockchain: Socio-Economic Factors Behind yhe Adoption. EPJ Data Science.
- Priestley, R. (1996). The arbitrage pricing theory, macroeconomic and financial factors, and expectations generating processes. Journal of Banking and Finance, 20(5), 869-890.
- Rahman, A., & Dawood, A. K. (2019). Bitcoin and future of cryptocurrency. Ushus Journal of Business Management, 18(1), 61-66.
- Sadraoui, T., Nasr, A., & Mgadmi, N. (2022). Studding Relationship Between Bitcoin, Exchange Rate and Financial Development: A Panel Data Analysis. International Journal of Managerial and Financial Accounting, January.
- Sarker, P. K., & Wang, L. (2022). Co-Movement and Granger Causality Between Bitcoin and M2, Inflation and Economic Policy Uncertainty: Evidence from the U.K. and Japan. Heliyon, 8(October), E11178.
- Sinha, K., Gurung, B., Paul, R. K., Kumar, A., Panwar, S., Alam, W., Ray, M., & Rathod, S. (2012). Volatility spillover using multivariate GARCH model: an application in futures and spot market price of black pepper.
- Shrestha, N. (2020). Detecting Multicollinearity in Regression Analysis. American Journal of Applied Mathematics and Statistics, 8(2), 39-42.
- Shuai, Z., Xinyu, H., & Shusong, B. (2021). What Determines Interest Rates for Bitcoin Lending? Research in International Business and Finance, 58(March), 101443.
- Su, C., Qin, M., Tao, R., & Zhang, X. (2020). Is the Status of Gold Threatened by Bitcoin ? Economic Research-Ekonomska Istraživanja, 33(1), 420-437.
- Sukamulja, S., & Sikora, C. O. (2018). The New Era of Financial Innovation: The Determinants of Bitcoin’S Price. Journal of Indonesian Economy and Business, 33(1), 46.
- Wang, H., & Gao, S. (2024). The future of the international financial system: The emerging CBDC network and its impact on regulation. Regulation and Governance, 18(1), 288-306.
- Wooldridge, J. M. (2013). Econometrics: A Modern Approach 5th Edition. In Introductory Econometrics: A Practical Approach.
- Yang, K., & Zhang, Z. (2021). What are the Potential Factors That Will Affect the Value of Bitcoin in The U.S.? Proceedings of the 2021 International Conference On Financial Management And Economic Transition (FMET 2021), 190(Fmet), 436-441.
- Yuneline, M. H. (2019). Analysis of cryptocurrency’s characteristics in four perspectives. Journal of Asian Business and Economic Studies, 26(2), 206-219.
- Zwick, H. S., & Syed, S. A. S. (2019). Bitcoin And Gold Prices: A Fledging Long-Term Relationship. Theoretical Economics Letters, 2516-2525.