Which factors drive Bitcoin volatility: Macroeconomic, technical, or both?

Wang, Jiqian; Ma, Feng; Bouri, Elie; Guo, Yangli

doi:10.1002/for.2930

Cited by 38 publications

(18 citation statements)

References 71 publications

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“…Elsayed et al ( 2022 ), Jiang et al ( 2022 ), Maghyereh and Abdoh ( 2022 ), and Akyildirim et al ( 2021 ) have all documented significant volatility links between aggregate stock market returns and the Bitcoin market. Furthermore, the majority of previous studies have attempted to explain Bitcoin volatility (see, e.g., Walther et al 2019 ; D’Amato et al 2022 ; Sapkota 2022 ; Wang et al 2022 ) or focused on the predictability of major cryptocurrencies and the profitability of trading strategies using machine learning techniques (Sebastião and Godinho 2021 ), 6 whereas our paper has a different scope by focusing on Bitcoin price ability to predict stock volatility. The second line of investigation focuses on Bitcoin and sectoral stock indices.…”

Section: Introductionmentioning

confidence: 99%

The predictive power of Bitcoin prices for the realized volatility of US stock sector returns

Bouri

Salisu²,

Gupta³

2023

Financ Innov

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This paper is motivated by Bitcoin’s rapid ascension into mainstream finance and recent evidence of a strong relationship between Bitcoin and US stock markets. It is also motivated by a lack of empirical studies on whether Bitcoin prices contain useful information for the volatility of US stock returns, particularly at the sectoral level of data. We specifically assess Bitcoin prices’ ability to predict the volatility of US composite and sectoral stock indices using both in-sample and out-of-sample analyses over multiple forecast horizons, based on daily data from November 22, 2017, to December, 30, 2021. The findings show that Bitcoin prices have significant predictive power for US stock volatility, with an inverse relationship between Bitcoin prices and stock sector volatility. Regardless of the stock sectors or number of forecast horizons, the model that includes Bitcoin prices consistently outperforms the benchmark historical average model. These findings are independent of the volatility measure used. Using Bitcoin prices as a predictor yields higher economic gains. These findings emphasize the importance and utility of tracking Bitcoin prices when forecasting the volatility of US stock sectors, which is important for practitioners and policymakers.

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Section: Introductionmentioning

confidence: 99%

The predictive power of Bitcoin prices for the realized volatility of US stock sector returns

Bouri

Salisu²,

Gupta³

2023

Financ Innov

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“…The outcome of this study indicate a time-dependent downside risk spillover between Bitcoin and four assets (currencies, equities, commodities and bonds). In another study, Wang et al (2023) Most recently Yousaf et al (2023) explored the diversification, safe haven and hedging properties of FAANA (Facebook, Apple, Amazon, Netflix and Alphabet) stocks against four alternative assets (US Treasury bonds, gold, US Dollar/CHF and Bitcoin). The findings showed majority of FAANA stocks as weak/strong safe havens against Bitcoin, gold, Treasury bonds and Dollar/CHF.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The outcome of this study indicate a time‐dependent downside risk spillover between Bitcoin and four assets (currencies, equities, commodities and bonds). In another study, Wang et al (2023) investigate the role of technical and macroeconomic indicators in forecasting the realized volatility of Bitcoin. Adopting 18 technical indicators and 17 macroeconomic variables, the findings suggest that the macroeconomic indicators (S&P 500 realized volatility, global real economic activity index, and trade‐weighted USD index return) have a stronger ability to forecast Bitcoin volatility than that of technical indicators.…”

Section: Literature Reviewmentioning

confidence: 99%

“…However, there is no(little) empirical research exploring the behaviour of the most popular cryptocurrency, Bitcoin relative to African fiat currencies to see if it can be an alternative to African fiat currencies in periods of high inflation and exchange rate volatility. Related studies such as Yousaf et al (2023), Rehman et al (2023), Wang et al (2023), Zhang et al (2021), Kristjanpoller and Bouri (2019), Gajardo et al (2018), Ehlers and Gauer (2019) and Corelli (2018) explored the connection between cryptocurrencis and global reserve currencies such as the US dollar, the Great Britain Pound, the Euro, the South African Rand and observed interconnections among the currencies. The related studies also applied models that capture time information and ignored essential information relating to frequency domain.…”

Section: Introductionmentioning

confidence: 98%

“…2023),Wang et al (2023),Zhang et al (2021),Wu and Pandey (2014),Dyhrberg (2016b),Carrick (2016),Gajardo et al …”

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confidence: 99%

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Cryptocurrency and African fiat currencies: A peaceful coexistence?

Kumah

2023

Economic Notes

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This study examines the asymmetric behaviour of Bitcoin relative to six major African fiat currencies (Egyptian Pound, Cedi, ZAR, Naira, Rupee and Dinar) for the period 10 August 2015 to 31 December 2022. The time and frequency information in the time series of the currencies were captured applying the ensemble empirical mode decomposition. The quantile regression (QR) and quantile‐in‐quantile regression (QQR) were applied on the decomposed series to examine the connections among the currencies at different currency regimes across time. The empirical results show that both QR and QQR can adequately capture the time‐varying asymmetric behaviour of the currencies across time. The results range from weak to very strong dependencies albeit both negative and positive across different quantiles. Our findings suggest that except for ZAR, Bitcoin is a viable alternative currency to African reserve currencies from the medium‐term since it can hedge depreciation and forex risk of the fiat currencies. Based on the findings of this study, we recommend that forex traders and policymakers in Africa should adopt Bitcoin as an alternative currency to African currencies in the medium‐term to mitigate currency crises in the continent.

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The Bitcoin price and Bitcoin price uncertainty: Evidence of Bitcoin price volatility

Köse,

Yildirim,

Ünal

et al. 2024

Journal of Futures Markets

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This study examines the Bitcoin price by taking into account global factors, including the Chicago Board Options Exchange's Market Volatility Index (VIX), the US dollar index, the gold price, the oil price, and Bitcoin price volatility. The analysis is conducted using the structural vector autoregression (SVAR) model. The variance decomposition findings revealed that the influence of the VIX on the Bitcoin price was initially restricted, but progressively intensified over time. Among the indicators, Bitcoin price volatility had the highest explanatory share in both daily and weekly data analysis. The impulse response functions demonstrated a statistically significant inverse relationship between the VIX and the Bitcoin price. Furthermore, the analysis revealed that the Bitcoin price was mostly impacted by its own volatility. This implies that investing in Bitcoin requires a certain level of risk‐taking.

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Which factors drive Bitcoin volatility: Macroeconomic, technical, or both?

Cited by 38 publications

References 71 publications

The predictive power of Bitcoin prices for the realized volatility of US stock sector returns

The predictive power of Bitcoin prices for the realized volatility of US stock sector returns

Cryptocurrency and African fiat currencies: A peaceful coexistence?

The Bitcoin price and Bitcoin price uncertainty: Evidence of Bitcoin price volatility

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