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Financial implications of fourth industrial revolution: Can bitcoin improve prospects of energy investment?

Chi-Wei Su, Meng Qin, Ran Tao and Muhammad Umar

Technological Forecasting and Social Change, 2020, vol. 158, issue C

Abstract: Bitcoin and the blockchain technology on which it is based are the key drivers behind the accelerated pace of Fourth Industrial Revolution in the domain of Finance. The offshoots of this technology however are not limited and are rapidly spreading in other domains such as oil market. This paper investigates the causality or influences that both markets, Bitcoin price (BP) and oil price (OP) have on each other by applying the bootstrap Granger causal relationship tests considering full as well as sub-samples. Our analysis reveals that shocks originated in OP and transmitted towards BP can be both positive or negative. The positive impact indicates that Bitcoin can be viewed as an asset helpful in avoiding the risks of the high OP, which also indicates that Bitcoin and oil are in the same boat, however, the negative effects cannot support this view. The negative influence of OP on BP can be explained by the burst of the Bitcoin bubble which has weakened its hedging ability. In turn, there is also a negative influence or reverse causality running from BP to OP, highlighting that the demand for oil by investors can be threatened by the increasing BP. Keeping in view the more integrated and complexed financial dynamics which are the results of Fourth Industrial Revolution, investors can benefit from this interrelationship to diversify the risks and optimize their investment by building a more balanced portfolio. Also, governments could promote and protect the healthy development of the Bitcoin and energy market by preventing the Bitcoin bubbles and understanding the reasons of oil price volatility.

Keywords: Bitcoin price; Oil price; Rolling-window; Granger causal relationship (search for similar items in EconPapers)
JEL-codes: C32 G12 Q43 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.techfore.2020.120178

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