Do crypto investors wait and see during policy uncertainty? An examination of the dynamic relationships between policy uncertainty and exchange inflows of Bitcoin

Purpose - In this paper, the authors examine the short-term and long-term impact of general economic policy uncertainty (EPU) and crypto-specific policy uncertainty on Bitcoin’s (BTC) exchange inflows – a form of crypto investor behaviors that the authors expect to drive the cryptocurrency volatility. Design/methodology/approach - The authors use an autoregressive distributed lag (ARDL), coupled with the bounds testing approach by Pesaranet al.(2001), to analyze a weekly dataset of BTC’s exchange inflows and relevant policy uncertainty indices. Findings - The authors observe both short-term and long-term impacts of the crypto-specific policy uncertainty on BTC’s exchange inflows, whereas the general EPU only explains these inflows in a short-term manner. In addition, the authors find exchange inflows of BTC “Granger” cause its price volatility. Furthermore, the authors document a significant and relatively persistent response of BTC volatility to shocks to its exchange inflows. Originality/value - This study’s findings offer significant contributions to research in policy uncertainty and investor behaviors.