An analysis of the dynamic relationship between cryptocurrency uncertainty and white precious metals

Abstract

This study focuses on analyzing the behavior of the white precious metals market in response to changes in cryptocurrency uncertainty. It provides new insights into the dynamic relationships between these two asset classes. The study uses a quantile regression approach, impulse response functions analysis, and forecast error variance decomposition estimation. The main findings of this paper suggest that the two novel uncertainty measures, namely UCRY policy and UCRY price uncertainty indexes, do not have a significant effect on silver, platinum, and palladium returns. This implies that they do not lead to destabilizing effects in the precious metal market. Therefore, white precious metals are not viewed as a substitute for cryptocurrencies and do not respond to changes in cryptocurrency markets. Hence, the study suggests that white precious metals may be a useful diversification tool for investors looking to hedge against risks in the cryptocurrency market. JEL classification G11, G15, G17, G32