Risk Management in the Area of Bitcoin Market Development: Example from the USA

Laeeq Razzak Janjua (), Iza Gigauri (), Agnieszka Wójcik-Czerniawska and Elżbieta Pohulak-Żołędowska
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Laeeq Razzak Janjua: Faculty of Science, WSB University, 41-300 Dąbrowa Górnicza, Poland
Iza Gigauri: School of Business, Computing and Social Sciences, St. Andrew the First-Called Georgian University, Tbilisi 0179, Georgia
Agnieszka Wójcik-Czerniawska: College of Management and Finance, Warsaw School of Economics (SGH), 02-554 Warsaw, Poland
Elżbieta Pohulak-Żołędowska: Faculty of Economics and Finance, Wroclaw University of Economics and Business, 53-345 Wroclaw, Poland

Risks, 2024, vol. 12, issue 4, 1-21

Abstract: This paper explores the relationship between Bitcoin returns, the consumer price index, and economic policy uncertainty. Employing the QARDL method, this study examines both short- and long-term dynamics between macroeconomic factors and Bitcoin returns. Our analysis of monthly time series data from January 2011 to November 2023 reveals that volatile US economic policy indicators, such as high economic policy uncertainty, volatile inflation, and rising interest rates, have recently exerted a negative impact on Bitcoin returns. This study shows that these results are true not only for traditional money but also for cryptocurrencies such as Bitcoin, despite their cardinal features. Its decentralized nature, indicating that it has no physical representation, is not tied to any authority or national economy and relies on a complex algorithm to track transactions. Further, it yields volatile returns that depend on macroeconomic indicators.

Keywords: risk; financial risk management; digital economy; digital transformation; challenges in digital environment; investment decisions; financial markets (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2024
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