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What can monetary policy tell us about Bitcoin?

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  • Marcin Pietrzak

    (Polish Academy of Sciences)

Abstract

Bitcoin enthusiasts argue that it is free from central banks decisions and it is a hedge against inflation. Using high-frequency monetary surprises associated with decisions made by the Fed and the ECB, I show that these claims are not supported by the data. Bitcoin systemically reacts to monetary and central bank information shocks. I find that these reactions vary over time: not only by changing the magnitude but sometimes sign of reaction. Fed’s disinflationary shocks increase Bitcoin price, while the ECB’s decrease, hence providing little support for it as an inflation hedge.

Suggested Citation

  • Marcin Pietrzak, 2023. "What can monetary policy tell us about Bitcoin?," Annals of Finance, Springer, vol. 19(4), pages 545-559, December.
    • Handle: RePEc:kap:annfin:v:19:y:2023:i:4:d:10.1007_s10436-023-00432-3
    DOI: 10.1007/s10436-023-00432-3
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    References listed on IDEAS

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    More about this item

    Keywords

    Bitcoin; Time-varying parameter VAR; Monetary policy; Information effect;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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