The Impact of Cryptocurrency Markets on the Traditional Financial Markets of the USA, UK, and Germany

Abstract

The acceleration of the globalization process and the structural changes in technology that emerged in the 2000s have impacted financial markets. This interaction in the financial markets has made the emergence of new financial assets a necessity. The study examines the development of cryptocurrencies (Bitcoin, Ethereum, and Tether) as a new asset class, while analyzing the interactions of these digital assets with traditional financial instruments such as stocks. For this purpose, the United States, Germany, and the United Kingdom have utilized monthly data from April 2016 to June 2024 for financial markets. In the empirical analysis section of the study, the Augmented Dickey-Fuller and Phillips-Perron unit root tests, which are frequently used in the literature, have been utilized for testing the unit root among the variables. The cointegration relationship between the variables has been tested using the ARDL (Autoregressive Distributed Lag Bound Test) approach. According to the results of the ARDL boundary test, it has been determined that there is no significant relationship between cryptocurrency markets and stock returns for the UK financial markets, both in the long term and in the short term. According to the results of the ARDL bounds test, there is a significant and positive relationship between the cryptocurrency assets Bitcoin and Tether and stock returns in the long term for the German financial markets. In the short term, no meaningful relationship has been identified. According to the results of the ARDL boundary test, there is a significant and positive relationship between Bitcoin, a cryptocurrency asset, and stock returns in the long term for the U.S. financial markets, while no significant relationship was found between stock returns and Ethereum and Tether. In the short term, no meaningful relationship has been identified. These findings provide significant insights for policymakers, investors, and market analysts.