Bitcoin and Fiat Currency Interactions: Surprising Results from Asian Giants

Samet Gunay, Kerem Kaskaloglu and Shahnawaz Muhammed
Additional contact information
Samet Gunay: College of Business Administration, American University of the Middle East, Egaila 15453, Kuwait
Kerem Kaskaloglu: College of Engineering and Technology, American University of the Middle East, Egaila 15453, Kuwait
Shahnawaz Muhammed: College of Business Administration, American University of the Middle East, Egaila 15453, Kuwait

Mathematics, 2021, vol. 9, issue 12, 1-18

Abstract: This study examines the interaction of Bitcoin with fiat currencies of three developed (euro, pound sterling and yen) and three emerging (yuan, rupee and ruble) market economies. Empirical investigations are executed through symmetric, asymmetric and non-linear causality tests, and Markov regime-switching regression (MRSR) analysis. Results show that Bitcoin has a causal nexus with Chinese yuan and Indian rupee for price and various return components. The MRSR analysis justifies these findings by demonstrating the presence of interaction in contractionary regimes. Accordingly, it can be stated that when markets display a downward trend, appreciation of the Chinese yuan and Indian rupee positively and strongly affects the value of Bitcoin, possibly due to the market timing. The MRSR analysis also exhibits a transition from a tranquil to a crisis regime in March 2020 because of the pandemic. However, a shorter duration spent in the crisis regime in 2020 indicates the limited and relatively less harmful effect of the pandemic on the cryptocurrency market when compared to the turmoil that occurred in 2018.

Keywords: Bitcoin; cryptocurrency market; fiat money; causality analysis; return spillovers (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.mdpi.com/2227-7390/9/12/1395/pdf (application/pdf)
https://www.mdpi.com/2227-7390/9/12/1395/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jmathe:v:9:y:2021:i:12:p:1395-:d:575985

Access Statistics for this article

Mathematics is currently edited by Ms. Emma He

More articles in Mathematics from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().