Do crypto investors wait and see during policy uncertainty? An examination of the dynamic relationships between policy uncertainty and exchange inflows of Bitcoin

Linh Thi My Nguyen and Phong Thanh Nguyen

Review of Behavioral Finance, 2023, vol. 16, issue 2, 234-247

Abstract: Purpose - In this paper, the authors examine the short-term and long-term impact of general economic policy uncertainty (EPU) and crypto-specific policy uncertainty on Bitcoin’s (BTC) exchange inflows – a form of crypto investor behaviors that the authors expect to drive the cryptocurrency volatility. Design/methodology/approach - The authors use an autoregressive distributed lag (ARDL), coupled with the bounds testing approach by Pesaranet al.(2001), to analyze a weekly dataset of BTC’s exchange inflows and relevant policy uncertainty indices. Findings - The authors observe both short-term and long-term impacts of the crypto-specific policy uncertainty on BTC’s exchange inflows, whereas the general EPU only explains these inflows in a short-term manner. In addition, the authors find exchange inflows of BTC “Granger” cause its price volatility. Furthermore, the authors document a significant and relatively persistent response of BTC volatility to shocks to its exchange inflows. Originality/value - This study’s findings offer significant contributions to research in policy uncertainty and investor behaviors.

Keywords: Policy uncertainty; Cryptocurrency; Exchange inflows; Crypto investor behaviors; Bitcoin (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rbfpps:rbf-01-2023-0013

DOI: 10.1108/RBF-01-2023-0013

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