The Asymmetric Effects of the Interest Rate on the Bitcoin Price

Nezir Köse and Emre Ünal
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Nezir Köse: Department of Economics, Beykent University
Emre Ünal: Urban Institute, Kyushu University & Department of Economics, Firat University

Czech Journal of Economics and Finance (Finance a uver), 2023, vol. 73, issue 2, 189-217

Abstract: The news about the US interest rate is expected to cause significant changes in cryptocurrency markets in the 2020s. The asymmetric effects of the interest rate on the Bitcoin price were analyzed by using a SVAR model for the monthly period between January 2012 and October 2022. The selected variables are the VIX, interest rate spread, positive and negative real interest rates, DXY, the gold price, and the oil price. According to the variance decomposition, negative real interest rate shocks created a stronger influence than positive real interest rate shocks on the Bitcoin price. The negative real interest rate shocks became the most explanatory indicator over the period. Impulse response functions indicated that the response of the Bitcoin price to the positive interest rate was insignificant. However, its response to the negative real interest rate became negative and significant only during the mid-term. As a consequence, the negative real interest rate significantly influences the Bitcoin price. The results provide important implications for policymakers, portfolio managers, and investors.

Keywords: Bitcoin; interest rate; SVAR model (search for similar items in EconPapers)
JEL-codes: C5 F3 G1 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:73:y:2023:i:2:p:189-217

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