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The Impact of the Fed’s Monetary Policy on Cryptocurrencies: Novel Policy Implications for Central Banks

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  • Tayfun Tuncay Tosun

    (Department of International Trade and Finance, Istanbul Aydın University, Istanbul 34295, Türkiye)

  • Erginbay Uğurlu

    (Department of Economics and Finance, Istanbul Aydın University, Istanbul 34295, Türkiye)

Abstract

This study aims to analyze the impact of the U.S. Federal Reserve System’s monetary policy on major cryptocurrencies. Specifically, it explores whether the effects differ between volatile cryptocurrencies, such as Bitcoin and Ethereum, and the stablecoin Tether. To this end, we utilize an autoregressive distributed lag (ARDL) bounds testing approach, analyzing monthly data from January 2019 to April 2025. The empirical results indicate that the responses of volatile and stable cryptocurrencies to the Fed’s monetary policy differ. In the long term, the prices of Bitcoin and Ethereum tend to react positively to the Fed’s monetary policy changes, whereas Tether’s prices experience a negative impact. We recommend novel policy implications in this study based on these empirical findings.

Suggested Citation

  • Tayfun Tuncay Tosun & Erginbay Uğurlu, 2025. "The Impact of the Fed’s Monetary Policy on Cryptocurrencies: Novel Policy Implications for Central Banks," JRFM, MDPI, vol. 18(7), pages 1-14, July.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:7:p:393-:d:1702390
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    References listed on IDEAS

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    1. Eugene Msizi Buthelezi, 2025. "Cryptocurrency Responses to U.S. Monetary Policy Shocks: A Data-Driven Exploration of Price and Volatility Patterns," The American Economist, Sage Publications, vol. 70(1), pages 94-119, March.
    2. Md Samsul Alam & Alessandra Amendola & Vincenzo Candila & Shahram Dehghan Jabarabadi, 2024. "Is Monetary Policy a Driver of Cryptocurrencies? Evidence from a Structural Break GARCH-MIDAS Approach," Econometrics, MDPI, vol. 12(1), pages 1-20, January.
    3. Angelo Corelli, 2018. "Cryptocurrencies and Exchange Rates: A Relationship and Causality Analysis," Risks, MDPI, vol. 6(4), pages 1-11, October.
    4. Lai T. Hoang & Dirk G. Baur, 2024. "How stable are stablecoins?," The European Journal of Finance, Taylor & Francis Journals, vol. 30(16), pages 1984-2000, November.
    5. Aloui, Donia & Zouaoui, Riadh & Rachdi, Houssem & Guesmi, Khaled & Yarovaya, Larisa, 2024. "The impact of ECB’s Quantitative Easing on cryptocurrency markets during times of crisis," Research in International Business and Finance, Elsevier, vol. 69(C).
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