Beyond the Buzz: A Measured Look at Bitcoin’s Viability as Money

Essa Hamad Al-Mansouri, Ahmet Faruk Aysan and Ruslan Nagayev ()
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Essa Hamad Al-Mansouri: College of Islamic Studies, Hamad Bin Khalifa University, Qatar Foundation, Doha P.O. Box 34110, Qatar
Ahmet Faruk Aysan: College of Islamic Studies, Hamad Bin Khalifa University, Qatar Foundation, Doha P.O. Box 34110, Qatar
Ruslan Nagayev: College of Islamic Studies, Hamad Bin Khalifa University, Qatar Foundation, Doha P.O. Box 34110, Qatar

JRFM, 2025, vol. 18, issue 1, 1-22

Abstract: This paper examines Bitcoin’s viability as money through the lens of its risk profile, with a particular focus on its store of value function. We employ a suite of wavelet techniques, including Wavelet Transform (WT), Wavelet Transform Coherence (WTC), Multiple Wavelet Coherence (MWC), and Partial Wavelet Coherence (PWC), to decompose the risk structure of Bitcoin and analyze its relationship with various systematic risk factors. Our dataset spans from 13 August 2015 to 29 June 2024, and includes Bitcoin, major commodities, global and US equities, Shari’ah-compliant equities, Ethereum, and the Secured Overnight Financing Rate (SOFR). We find that Bitcoin’s risk profile is increasingly aligned with traditional financial assets, indicating growing market integration. While Bitcoin exhibits high volatility, a significant portion of this volatility can be attributed to systematic rather than idiosyncratic factors. This suggests that Bitcoin’s risk may be more diversifiable than previously thought. Our findings have important implications for monetary policy and financial regulation, challenging the notion that Bitcoin’s volatility precludes its use as money and suggesting that regulatory approaches should consider Bitcoin’s evolving risk characteristics and increasing integration with broader financial markets.

Keywords: Bitcoin; cryptocurrency; monetary policy; systematic risk; wavelet analysis; store of value; financial integration; market efficiency (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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