Economics

Is cryptocurrency a hedging tool during economic policy uncertainty? An empirical investigation

C. He, Y. Li, et al.

This study explores the intriguing relationship between economic policy uncertainty (EPU) and popular cryptocurrencies like Bitcoin and Ethereum. The research, conducted by Chengying He, Yong Li, Tianqi Wang, and Salman Ali Shah, demonstrates a short-term hedging potential against EPU primarily within the US market, while also uncovering a unique long-term positive relationship for Tether. Discover the implications of these findings on cryptocurrency market volatility.

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Abstract

This study investigates the relationship between economic policy uncertainty (EPU) and cryptocurrencies (Bitcoin, Ethereum, Tether) using monthly data from January 2021 to April 2023. Quantile regression and Granger causality analyses reveal a short-term hedging potential for Bitcoin and Ethereum against EPU, particularly in the US market. However, this hedging effect diminishes in the long term. Tether shows a positive long-term association with EPU. The study suggests a need for a collaborative framework among stakeholders to mitigate cryptocurrency market volatility.

Publisher

HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS

Published On

Jan 06, 2024

Authors

Chengying He, Yong Li, Tianqi Wang, Salman Ali Shah

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