Bitcoin's innovative aspects, return volatility and uncertainty shocks

Bruno Ferreira Frascaroli

International Journal of Financial Markets and Derivatives, 2020, vol. 7, issue 3, 224-245

Abstract: This paper investigates how Bitcoin's (BTC) return volatility is affected by the main global financial market indicators, its own innovative aspects and uncertainty. First, the strategy consists in estimate structural break tests to find significative regime switching in BTC returns. Next, conditional volatility parameters are estimated from multivariate perspective using the DCC-MGARCH model. At this stage, the Standard % Poor 500 index, China's SSEC stock index and the price of gold were used to estimate the quasi-covariances and quasi-correlations matrices of global drivers of BTC returns. In the last stage, impulse response functions are also estimated, in order to understand how BTC returns are affected by risk and uncertainty shocks. There are many factors and uncertainty surrounding the BTC market microstructure and indicators of a speculative bubble from the end of 2017 to mid-2018. The findings seem to point to barriers for investors and development of blockchain benefits.

Keywords: Bitcoin; cryptocurrency; innovation; blockchain; global drivers; return volatility; uncertainty; structural break; MGARCH; VAR. (search for similar items in EconPapers)
Date: 2020
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