A critical analysis of volatility surprise in Bitcoin cryptocurrency and other financial assets

Doumenis, Yianni, Izadi, Javad ORCID: https://orcid.org/0000-0001-5607-5077, Dhamdhere, Pradeep, Katsikas, Epameinondas and Koufopoulos, Dimitrios (2021) A critical analysis of volatility surprise in Bitcoin cryptocurrency and other financial assets. Risks, 9 (11).

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Abstract

The purpose of this paper is to investigate the viability as compared with other financial assets of cryptocurrencies as a currency or as an asset investment. This paper also aims to see which macro variable relates more to the price of cryptocurrencies especially Bitcoin. Since the whole concept of cryptocurrencies is quite novel, an attempt has been made to briefly explain the underlying blockchain technology that forms the bedrock of cryptocurrencies. In this study, we use the sec-ondary data, i.e., price history of Bitcoin from September 2014 to September 2021 for the last 7 years, captured from trading exchanges. We predicted monthly returns of Bitcoin with that of S&P 500, gold, and Treasury Bond. Our findings show that Bitcoin has very high volatility as compared to S&P 500, Gold and Treasury Bond. Also, our findings show that there is a positive correlation between Bitcoin’s price volatility and other three financial assets before and during COVID-19. Hence Bitcoin is acting more as a speculative asset rather than a steady store of value. This can be drawn from the comparison with the debt market i.e., Treasury Bond that invests in long-dated (30 years) US treasuries with which Bitcoin shows no relationship. The findings of this study could help with the understanding of how the future of Bitcoin is likely to span out. This has important im-plications for Bitcoin investors. The current study contributes to the extant literature by providing empirical evidence on the long-term social sustainability vis a vis supply chain traceability.

Item Type: Article
Uncontrolled Keywords: cryptocurrencies; Bitcoin; investment price volatility
Subjects: Business and finance > Accounting and finance > International and corporate finance
Related URLs:
Depositing User: Javad Izadi
Date Deposited: 03 Nov 2021 10:53
Last Modified: 03 Dec 2021 16:05
URI: http://repository.uwl.ac.uk/id/eprint/8395

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