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Regime-switching in bitcoin volatility under global uncertainty: Markov-switching GARCH and hidden Markov Copula approaches

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  • Shakourloo, Amin
  • Azimli, Asil

Abstract

This study analyzes the regime-switching behavior of Bitcoin volatility and its dependence on macroeconomic factors in globalmacro-financial uncertainty periods. Using the Markov-Switching GARCH (MS-GARCH) model and the Hidden Markov Copula framework, we capture the nonlinear, tail dependence in the co-movement of Bitcoin volatility and various foreign exchange pairs. The resultsindicate that Bitcoin's behavior deviates substantially from a haven asset in crisis periods, supporting the importance of regime-aware risk assessmentand asset pricing models. This paper adds to the literature byreplacing static breakpoint assumptions with stochastic regime-switching and augmenting volatility modeling with macro-triggers. Practical implications are drawn for institutional investors to adopt regime-sensitive risk models to manage tail risks, while regulators can implement early-warning systems based on regime shifts.

Suggested Citation

  • Shakourloo, Amin & Azimli, Asil, 2026. "Regime-switching in bitcoin volatility under global uncertainty: Markov-switching GARCH and hidden Markov Copula approaches," Research in International Business and Finance, Elsevier, vol. 83(C).
    • Handle: RePEc:eee:riibaf:v:83:y:2026:i:c:s027553192600022x
    DOI: 10.1016/j.ribaf.2026.103295
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