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The effects of markets, uncertainty and search intensity on bitcoin returns

Theodore Panagiotidis (), Thanasis Stengos () and Orestis Vravosinos

International Review of Financial Analysis, 2019, vol. 63, issue C, 220-242

Abstract: We review the literature and examine the effects of shocks on bitcoin returns. We assess the effects of factors such as stock market returns, exchange rates, gold and oil returns, FED's and ECB's rates and internet trends on bitcoin returns. Alternative VAR and FAVAR models are employed and generalized as well as local impulse response functions are produced. Our results reveal (i) a significant interaction between bitcoin and traditional stock markets, (ii) a weaker interaction with FX markets and the macroeconomy and (iii) an anemic importance of popularity measures. Lastly, we reveal the increased impact of Asian markets on bitcoin compared to other geographically-defined markets, which however appears to have waned in the last two years after the Chinese regulatory interventions and the sudden contraction of CNY's share in bitcoin trading volume.

Keywords: Bitcoin; Cryptocurrency; Exchange rate; Returns; FAVAR; Factor analysis (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2019
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