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Bitcoin and integration patterns in the forex market

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  • Virk, Nader

Abstract

This study investigates the dependence structure between bitcoin (BTC) and five leading – leaving the US dollar out – conventional currencies by using Engle's (2002) DCC model. Results show a detachment between changes in BTC returns and fiat currencies. The weak association between conditional BTC volatility and its dynamic pairwise correlations with fiat currencies further endorses this finding. Implying that BTC investing does not offer currency hedging gains in consideration to its lack of return dependence, and association of its conditional volatility, with the integration patterns seen among fist currencies.

Suggested Citation

  • Virk, Nader, 2022. "Bitcoin and integration patterns in the forex market," Finance Research Letters, Elsevier, vol. 44(C).
    • Handle: RePEc:eee:finlet:v:44:y:2022:i:c:s1544612321001732
    DOI: 10.1016/j.frl.2021.102092
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    Cited by:

    1. Kubo, Kenji & Nakagawa, Kei & Mizukami, Daiki & Acharya, Dipesh, 2023. "Optimal liquidation strategy for cryptocurrency marketplaces using stochastic control," Finance Research Letters, Elsevier, vol. 53(C).
    2. Ahmed BenSaïda, 2023. "The linkage between Bitcoin and foreign exchanges in developed and emerging markets," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-27, December.

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    More about this item

    Keywords

    Bitcoin; conventional currencies; DCC model; integration patterns; hedging; conditional volatility. JEL classification: C32; C5; E44; G11; G15;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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