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The Asymmetric Effects of the Interest Rate on the Bitcoin Price

Author

Listed:
  • Nezir Köse

    (Department of Economics, Beykent University)

  • Emre Ünal

    (Urban Institute, Kyushu University & Department of Economics, Firat University)

Abstract

The news about the US interest rate is expected to cause significant changes in cryptocurrency markets in the 2020s. The asymmetric effects of the interest rate on the Bitcoin price were analyzed by using a SVAR model for the monthly period between January 2012 and October 2022. The selected variables are the VIX, interest rate spread, positive and negative real interest rates, DXY, the gold price, and the oil price. According to the variance decomposition, negative real interest rate shocks created a stronger influence than positive real interest rate shocks on the Bitcoin price. The negative real interest rate shocks became the most explanatory indicator over the period. Impulse response functions indicated that the response of the Bitcoin price to the positive interest rate was insignificant. However, its response to the negative real interest rate became negative and significant only during the mid-term. As a consequence, the negative real interest rate significantly influences the Bitcoin price. The results provide important implications for policymakers, portfolio managers, and investors.

Suggested Citation

  • Nezir Köse & Emre Ünal, 2023. "The Asymmetric Effects of the Interest Rate on the Bitcoin Price," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 73(2), pages 189-217, June.
    • Handle: RePEc:fau:fauart:v:73:y:2023:i:2:p:189-217
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    File URL: https://journal.fsv.cuni.cz/mag/article/show/id/1517
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    More about this item

    Keywords

    Bitcoin; interest rate; SVAR model;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • F3 - International Economics - - International Finance
    • G1 - Financial Economics - - General Financial Markets

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