The inevitable role of bilateral relation: a fresh insight into the bitcoin market

Meng Qin, Tong Wu, Ran Tao, Chi-Wei Su and Stefea Petru

Economic Research-Ekonomska Istraživanja, 2022, vol. 35, issue 1, 4260-4279

Abstract: This paper clarifies the association between the Sino-U.S. bilateral relation (BR) and Bitcoin price (BCP) by applying the bootstrap full- and sub-sample Granger causality tests. It reveals that BR has positive and negative effects on BCP. The negative impact points out that Bitcoin is viewed as a tool to avoid uncertainties caused by the deterioration of BR, also proving that the strained relation between China and the U.S. can stimulate the Bitcoin market. However, this opinion is not held under a positive impact, the main explanation is that the burst of bubble weakens its ability to hedge risks. The above conclusion is not consistent with the theoretical model, underlining that the Bitcoin market is boosted by the deterioration of BR. Conversely, there is a negative influence from BCP to BR, meaning that the relationship between China and the U.S. can be reflected by the Bitcoin market. Under the complex and volatile international situation, investors can benefit from this investigation to compensate for the losses and keep their wealth. Also, it helps the related authorities to create a stable investment environment and promote friendly bilateral relations.

Date: 2022
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DOI: 10.1080/1331677X.2021.2013269

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