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Jumps in Geopolitical Risk and the Cryptocurrency Market: The Singularity of Bitcoin

Author

Listed:
  • Elie Bouri

    (USEK Business School, Holy Spirit University of Kaslik, Jounieh, Lebanon)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa)

  • Xuan Vinh Vo

    (University of Economics Ho Chi Minh City, Ho Chi Minh City, Vietnam)

Abstract

Are price discontinuities in cryptocurrencies jointly related to large swings in geopolitical risk? This is a relevant question to answer given recent news from the press that Bitcoin’s large price swings are driven by large swings in the level of geopolitical risk. We answer this question by examining first the jump incidence of daily returns for Bitcoin and other leading cryptocurrencies via the application of the approach of Laurent et al. (2016) and then by studying the co-jumps using logistic regressions. Preliminary results show that the price behaviour of all cryptocurrencies under study is jumpy. Further analyses show reasonable evidence to imply that co-jumps are significant for the case of Bitcoin only. This finding nicely complements previous studies arguing that Bitcoin is a hedge against geopolitical risk.

Suggested Citation

  • Elie Bouri & Rangan Gupta & Xuan Vinh Vo, 2020. "Jumps in Geopolitical Risk and the Cryptocurrency Market: The Singularity of Bitcoin," Working Papers 202015, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202015
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    References listed on IDEAS

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    Cited by:

    1. Faheem Aslam & Paulo Ferreira & Haider Ali & Ana Ercília José, 2022. "Application of Multifractal Analysis in Estimating the Reaction of Energy Markets to Geopolitical Acts and Threats," Sustainability, MDPI, vol. 14(10), pages 1-23, May.
    2. Andrea Delle Foglie & Gianni Pola, 2021. "Make the Best from Comparing Conventional and Islamic Asset Classes: A Design of an All-Seasons Combined Portfolio," JRFM, MDPI, vol. 14(10), pages 1-17, October.
    3. Selmi, Refk & Bouoiyour, Jamal & Wohar, Mark E., 2022. "“Digital Gold” and geopolitics," Research in International Business and Finance, Elsevier, vol. 59(C).
    4. Long, Huaigang & Demir, Ender & Będowska-Sójka, Barbara & Zaremba, Adam & Shahzad, Syed Jawad Hussain, 2022. "Is geopolitical risk priced in the cross-section of cryptocurrency returns?," Finance Research Letters, Elsevier, vol. 49(C).
    5. Mustafa Tevfik Kartal & Mustafa Kevser & Fatih Ayhan, 2023. "Asymmetric effects of global factors on return of cryptocurrencies by novel nonlinear quantile approaches," Economic Change and Restructuring, Springer, vol. 56(3), pages 1515-1535, June.
    6. Ahmet Faruk Aysan & Ali Polat & Hasan Tekin & Ahmet Tunali, 2022. "The Ascent of Geopolitics: Scientometric Analysis and Ramifications of Geopolitical Risk," Working Papers hal-03638273, HAL.
    7. Νikolaos A. Kyriazis, 2021. "The effects of geopolitical uncertainty on cryptocurrencies and other financial assets," SN Business & Economics, Springer, vol. 1(1), pages 1-14, January.
    8. Ben Nouir, Jihed & Ben Haj Hamida, Hayet, 2023. "How do economic policy uncertainty and geopolitical risk drive Bitcoin volatility?," Research in International Business and Finance, Elsevier, vol. 64(C).
    9. Zhang, Zhengyong & Bouri, Elie & Klein, Tony & Jalkh, Naji, 2022. "Geopolitical risk and the returns and volatility of global defense companies: A new race to arms?," International Review of Financial Analysis, Elsevier, vol. 83(C).
    10. Anupam Dutta & Elie Bouri, 2022. "Outliers and Time-Varying Jumps in the Cryptocurrency Markets," JRFM, MDPI, vol. 15(3), pages 1-7, March.
    11. Foglia, Matteo & Palomba, Giulio & Tedeschi, Marco, 2023. "Disentangling the geopolitical risk and its effects on commodities. Evidence from a panel of G8 countries," Resources Policy, Elsevier, vol. 85(PB).

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    Keywords

    Geopolitical risk; Bitcoin; Cryptocurrencies; Jumps; GARCH;
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