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Economic uncertainty and national bitcoin trading activity

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  • Wüstenfeld, Jan
  • Geldner, Teo

Abstract

This study analyzes the dynamics between bitcoin trading, price activities, and economic surprise shocks from a broad and novel perspective on a national level. We start by estimating the response of bitcoin trading in terms of volume and volatility to economic surprises. Following this, we extend our framework by applying a Generalized AutoRegressive Conditional Heteroskedasticity model to get an indication of the volatility reaction of national bitcoin activities to economic surprise shocks. Our results show that local and global shocks affect local bitcoin activities and trading volatilities, confirming that economic events affect bitcoin markets. We argue that increased trading activity, coupled with a price reaction, indicates that bitcoin might be considered a hedge or safe haven asset against economic uncertainty. We find evidence that bitcoin is treated as a speculative asset against negative economic policy uncertainty shocks in Canada pre-Covid-19. These results change during the Covid-19 pandemic, leading to a significant structural break. Here, we find indications that bitcoin might be treated as a safe-haven asset in New Zealand and Australia. This shows that bitcoin behaves differently depending on the studied country, underlining the importance of country-level studies. It also shows that bitcoin is a new asset that is evolving rapidly and that the period in which it is studied is important.

Suggested Citation

  • Wüstenfeld, Jan & Geldner, Teo, 2022. "Economic uncertainty and national bitcoin trading activity," The North American Journal of Economics and Finance, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:ecofin:v:59:y:2022:i:c:s1062940821002199
    DOI: 10.1016/j.najef.2021.101625
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    1. Kumar Kulbhaskar, Anamika & Subramaniam, Sowmya, 2023. "Breaking news headlines: Impact on trading activity in the cryptocurrency market," Economic Modelling, Elsevier, vol. 126(C).
    2. Ştefan Cristian Gherghina & Liliana Nicoleta Simionescu, 2023. "Exploring the asymmetric effect of COVID-19 pandemic news on the cryptocurrency market: evidence from nonlinear autoregressive distributed lag approach and frequency domain causality," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-58, December.
    3. Arun Narayanasamy & Humnath Panta & Rohit Agarwal, 2023. "Relations among Bitcoin Futures, Bitcoin Spot, Investor Attention, and Sentiment," JRFM, MDPI, vol. 16(11), pages 1-24, November.
    4. Zhang, Pengcheng & Kong, Deli & Xu, Kunpeng & Qi, Jiayin, 2024. "Global economic policy uncertainty and the stability of cryptocurrency returns: The role of liquidity volatility," Research in International Business and Finance, Elsevier, vol. 67(PB).
    5. Chang, Chiu-Lan, 2024. "Extreme events, economic uncertainty and speculation on occurrences of price bubbles in crude oil futures," Energy Economics, Elsevier, vol. 130(C).
    6. Nikolaos Daskalakis & Theodoros Daglis, 2023. "The Russian War in Ukraine and its Effect in the Bitcoin Market," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 3-16.
    7. Będowska-Sójka, Barbara & Kliber, Agata, 2022. "Can cryptocurrencies hedge oil price fluctuations? A pandemic perspective," Energy Economics, Elsevier, vol. 115(C).
    8. Kliber, Agata, 2022. "Looking for a safe haven against American stocks during COVID-19 pandemic," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).

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    More about this item

    Keywords

    Bitcoin trading; Economic surprise shock; Economic policy uncertainty; Covid−19;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F15 - International Economics - - Trade - - - Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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