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Have cryptocurrencies arrived in the system of fiat currencies? An appraisal based on monetary policy uncertainty

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  • Cagli, Efe C.
  • Dimpfl, Thomas

Abstract

This paper examines the relationship between Bitcoin and other cryptocurrencies and monetary policy uncertainty (MPU). Bitcoin was introduced in 2008 as a decentralized digital currency, free from government control, to offer an alternative to traditional fiat currencies. Given its independence from central banks and, thus, monetary policies, Bitcoin is often considered a hedge against economic instability and uncertain monetary environments. Understanding if and how Bitcoin and other cryptocurrencies react to monetary policy uncertainty allows us to evaluate how integrated cryptocurrencies are into the fiat currency monetary system. To this end, this study empirically investigates the predictive power of MPU regarding cryptocurrency prices and volatility. It shows that by and large, the returns and the volatility of cryptocurrencies are independent from MPU which indicates that cryptocurrencies are still special and not a part of the fiat system.

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  • Cagli, Efe C. & Dimpfl, Thomas, 2025. "Have cryptocurrencies arrived in the system of fiat currencies? An appraisal based on monetary policy uncertainty," Finance Research Letters, Elsevier, vol. 85(PB).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pb:s1544612325012516
    DOI: 10.1016/j.frl.2025.107993
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    References listed on IDEAS

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    1. M'bakob, Gilles Brice, 2026. "Are contemporary policies uncertainties driving public attention to blockchain-fintech and price movements of related derivative products? Evidence from the United States," Research in International Business and Finance, Elsevier, vol. 81(C).

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    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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