Cryptocurrencies as a Speculative Asset: How Much Uncertainty is Included in Cryptocurrency Price?

Tayyaba Ahsan, Krystian Zawadzki and Mubashir Khan

SAGE Open, 2024, vol. 14, issue 2, 21582440241256263

Abstract: The aim of this paper is to examine the relationship between uncertainty indices (Geopolitical Uncertainty Index and Global Economic Policy Uncertainty Index) and cryptocurrencies. This study evaluated the behavior of cryptocurrencies with the evolution of uncertainties (GPU, EPU) on returns and volatility in terms of safe heaven as in traditional specualtive assets it increases their volaitility and reduces risk. For this purpose, this study examines the relationship between uncertanities indices, gold returns and crptocurrency by using the OLS regression for the monthly data from April 2017 to April 2022. The findings of this study indicate that the return and volatility of cryptocurrency increases. In particular, we note that the cryptocurrency market could serve as a weak hedge and safe against GEPU during a bull market; It could be considered a strong hedge, but in most cases could not serve as a safety against GPR. However, in case of Gold it is found that it serves as weak hedge against uncertainity indices and is not considered as safe heaven against GEPU and GPR. This study expands the current research on uncertainity indices and provides unique insight about the speculative nature of cryptocurrencies and safe heaven.

Keywords: uncertainty; speculative asset; geopolitical risk; global economic policy; cryptocurrency (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:sae:sagope:v:14:y:2024:i:2:p:21582440241256263

DOI: 10.1177/21582440241256263

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