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The effect of political and economic uncertainty on the cryptocurrency market

Author

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  • Colon, Francisco
  • Kim, Chaehyun
  • Kim, Hana
  • Kim, Wonjoon

Abstract

This article explores the effect of uncertainty on the cryptocurrency market. Previous work has been limited to analyzing the effect of uncertainty on Bitcoin. We depart from the previous literature by focusing on top 25 cryptocurrencies and find that the cryptocurrency market can serve as a strong hedge against geopolitical risks in most cases, but it could be considered a weak hedge and safe haven against economic policy uncertainty during a bull market. Notably, the cryptocurrency market reacts to uncertainty differently, depending on the type of uncertainty. Overall, our findings suggest that uncertainty is an essential determinant of cryptocurrency returns.

Suggested Citation

  • Colon, Francisco & Kim, Chaehyun & Kim, Hana & Kim, Wonjoon, 2021. "The effect of political and economic uncertainty on the cryptocurrency market," Finance Research Letters, Elsevier, vol. 39(C).
    • Handle: RePEc:eee:finlet:v:39:y:2021:i:c:s1544612320301707
    DOI: 10.1016/j.frl.2020.101621
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    References listed on IDEAS

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