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Bitcoin price versus Fed Fund rates. Note: Figure 1 displays the evolution of Bitcoin prices and Fed Fund rates. The two gray vertical lines correspond exactly to March 3 and 16, 2020, when the Fed Fund rates were cut, respectively, by 50 bp and 100 bp. Period: 01/01/2015–02/28/2021
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This study examines the potential influence of the Federal Reserve policy on Bitcoin price dynamics. The empirical investigation is based on methodologies to quantify the influence of the Fed Funds rate on Bitcoin through linear, nonlinear, and spillover effects. It covers a set of six representative assets, including Bitcoin, Fed Funds rate, S&P 5...
Citations
... La volatilité des cryptomonnaies est renforcée par la nature décentralisée de la blockchain, l'effet d'emballement des algorithmes et la très forte médiatisation des envolées des cours. Divers facteurs macroéconomiques permettent également d'expliquer la forte variabilité des prix des cryptomonnaies: le contrôle des capitaux (Biais et al., 2018b), les réglementations (Auer et Claessens, 2018;Jakub, 2015;Iyidogan, 2019), les chocs de politique monétaire (Ma et alii, 2022;Aboura, 2022), l'incertitude de la politique économique et des risques géopolitiques (Cheng et Yen, 2020;Ben Nouir et al., 2023), les politiques monétaires non conventionnelles (Schilling et Uhlig, 2018), etc. Des études ont également montré que les facteurs qui affectent les prix des cryptomonnaies diffèrent considérablement de ceux affectant les actifs conventionnels tels que les actions, les obligations (Bouri et al., 2016(Bouri et al., , 2017Dyhrberg, 2016aDyhrberg, , 2016b. Autrement dit, les cours et rendements des cryptomonnaies sont indépendants des facteurs typiques de tarification des actifs: facteurs macroéconomiques, facteurs boursiers, matières premières, rendements du marché des changes (Liu et Tsyvinksi, 2018). ...
Cet article analyse les facteurs explicatifs de la volatilité des cours des cryptomonnaies et les voies de régulation visant la stabilité de ces cours. Considérant la cryptomonnaie comme une innovation sociale et un fait social total, l'approche d'économie sociale distingue deux composantes essentielles dans la valeur des cryptomonnaies: une valeur intrinsèque qui assure la stabilité de cette monnaie cryptée, et une valeur résultant d'un rapport de force entre utilisateurs éthiques et utilisateurs spéculatifs aux logiques différentes. La volatilité extrême des cryptomonnaies s'explique par la prévalence de la logique extractive (spéculative) sur la logique collaborative (éthique) et se renforce via leur logique spatiale (décentralisée). L'étude recommande une régulation « négociée » et démocratique des cryptomonnaies, tenant compte de l'interaction entre éthique et technique au coeur de la blockchain, et implémentée à l'échelle nationale et supranationale. Une telle régulation induit de configurer des protocoles blockchains compatibles avec une volatilité limitée et des cryptomonnaies adossées à des projets d'utilité concrète. Abstract: This article analyzes the factors explaining the volatility of cryptocurrency prices and the regulatory pathways aimed at the stability of these prices. Considering cryptocurrency as a social innovation and a total social fact, the social economy approach distinguishes two essential components in the value of cryptocurrencies: an intrinsic value which ensures the stability of this encrypted currency, and a value resulting from a balance of power between ethical users and speculative users with different logics. The extreme volatility of cryptocurrencies is explained by the prevalence of extractive (speculative) logic over collaborative (ethical) logic and is reinforced via their spatial (decentralized) logic. The study recommends "negotiated" and democratic regulation of cryptocurrencies, taking into account the interaction between ethics and technique at the heart of the blockchain, and implemented on a national and supranational scale. Such regulation requires configuring blockchain protocols compatible with limited volatility and cryptocurrencies backed by projects of concrete utility.
... If investors anticipate higher inflation due to accommodative monetary policy and lower interest rates, they may turn to Bitcoin as a potential inflation hedge, leading to increased demand and potentially influencing its price. Evidence is provided that the Fed Funds Rate has a non-linear effect and a strong temporary spillover effect on Bitcoin (Aboura, 2022 ...
This study aims to determine the impact of macroeconomic variables on bitcoin prices in the United States. Bitcoin is one of the cryptocurrencies that has the highest price and the most users in the United States in recent years. This study uses monthly data on inflation, interest rates, USD/EUR rates, gold prices, and bitcoin prices. To achieve the objectives of this study, Dynamic Conditional Correlation (DCC) and Multivariate Generalized Autoregressive Conditional Heteroscedasticity (MGARCH) were used. The results showed that there is a negative and significant relationship between the variables of inflation, interest rates, and USD/EUR rates affecting the price of Bitcoin in that period. Conversely, there is a positive and significant relationship between the price of gold and the price of Bitcoin in the United States during that period. An in-depth understanding of how macroeconomic factors such as inflation, interest rates and the USD/EUR rates affect Bitcoin price is key to making smart investment decisions in an increasingly complex crypto market. The findings of this analysis confirm that the significant relationship between macroeconomic variables and Bitcoin price provides deeper insights for investors to anticipate market movements and design adaptive investment strategies.
... 31. Para una aproximación local a la situación de Estados Unidos y la actividad de la Reserva Federal respecto a seis activos seleccionados (incluido bitcoin), véase Aboura (2022). Y sobre la cuestión jurídica en la misma jurisdicción, consultar Enyi y Le (2017) (Gore y Camp, 2022). ...
Este trabajo se enmarca temáticamente dentro de la economía digital, al abordar los efectos de los activos digitales y la tecnología de encriptación que los sustenta (blockchain) sobre el control monetario centralizado. Empleando una metodología analítica comparada, enfocada en el análisis jurídico-económico de sistemas financieros seleccionados, se pretende demostrar que los criptoactivos menoscaban la eficacia de la política monetaria como instrumento de estabilización de precios, al constituir, en los hechos, sustitutos aún más eficaces que el dinero tradicional y, sin embargo, hallarse regulatoriamente excluidos de la masa monetaria. El trabajo, además, formula un juicio crítico sobre la necesidad regulatoria de integración final de los criptoactivos al sistema financiero por vía de su homologación al dinero de curso legal, o bien mediante la sustitución por una moneda digital propia, como forma de retener el control sobre la oferta de dinero que la política monetaria centralizada hace posible.
... However, the link is complex and not obvious; examining the influence of shifts in the Interest rate on Bitcoin's pricing reveals that its correlation is only sometimes direct. (Aboura, 2022) This study investigated how economic factors, such as interest rates, correlate with Bitcoin. ...
Our research paper investigates how public interest can affect the price of Bitcoin, considering
control variable influences such as Stock Market, Inflation Rate, Interest Rate, and Exchange Rate
to draw informed conclusions. This study proceeded with an Ordinary Least Squares (OLS)
analysis using empirical data gathered over ten years (2012 to 2021) across fourteen different
countries; then, we applied a weighted average of the 14 countries based on the Market
Capitalization of Bitcoin. Our findings point towards significant links between independent
variables' effects on bitcoin price (dependent variable)- Public Interest being explained as having
a notable positive impact. In contrast, the other factors assessed had evidenced negative relations.
... Moreover, the Bitcoin price does not indicate statistical response to nominal interest rate shocks. Aboura (2022) applied regression models and a VARbased spillover model to analyze the effect of FED funds rate on the Bitcoin price for the daily period spans from 1 January 2015 to 28 February 2021. It was stated that FED fund rates created nonlinear effects and temporarily strong spillover effects on Bitcoin. ...
... Second, works about the effects of interest rate shocks on cryptocurrencies have remained limited. For instance, a recent work by Aboura (2022) stated that there were nonlinear and temporary spillover effects of FED fund rates on Bitcoin. This paper explores whether the Bitcoin price responds asymmetrically to interest rate policies. ...
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.
... A new Bitcoin block is created approximately every 10 min, and the chain goes back to 2009, when Bitcoin was first created in response to irresponsible banking behavior causing the 2008 financial crisis (Aboura 2022). At the time of writing this article, there are 777,949 blocks on the Bitcoin blockchain (Blockchain.com ...
In August of 2022, the United States Department of Treasury sanctioned the virtual currency mixer Tornado Cash, an open-source and fully decentralised piece of software running on the Ethereum blockchain, subsequently leading to the arrest of one of its developers in The Netherlands. Not only was this the first time the Office of Foreign Assets Control (OFAC) extended its authority to sanction a foreign ‘person’ to software, but the decentralised nature of the software and global usage highlight the challenge of establishing jurisdiction over decentralised software and its global user base. The government claims jurisdiction over citizens, residents, and any assets that pass through the country’s territory. As a global financial center with most large tech companies, this often facilitates the establishment of jurisdiction over global conduct that passes through US servers. However, decentralised programs on blockchains with nodes located around the world challenge this traditional approach as either nearly all countries can claim jurisdiction over users, subjecting users to criminal laws in countries with which they have no true interaction, or they limit jurisdiction, thereby risking abuse by bad actors. This article takes a comparative approach to examine the challenges to establishing criminal jurisdiction on cryptocurrency-related crimes.
... Haq et al. [41], Cheng and Yen [49], and Nguyen et al. [50] have determined that economic policy uncertainties have a significant impact on the cryptocurrency market. In this period, Aboura [21] found that changes in US interest rates also influence the cryptocurrency market. Jarboui and Mnif [22] have concluded that the FOMC meetings during this period of market stress had a negative effect on the cryptocurrency market. ...
In recent years, the cryptocurrency market has been experiencing extreme market stress due to unexpected extreme events such as the COVID-19 pandemic, the Russia and Ukraine war, monetary policy uncertainty, and a collapse in the speculative bubble of the cryptocurrencies market. These events cause cryptocurrencies to exhibit higher market risk. As a result, a risk model can lose its accuracy according to the rapid changes in risk levels. Value-at-risk (VaR) is a widely used risk measurement tool that can be applied to various types of assets. In this study, the efficacy of three value-at-risk (VaR) models—namely, Historical Simulation VaR, Delta Normal VaR, and Monte Carlo Simulation VaR—in predicting market stress in the cryptocurrency market was examined. The sample consisted of popular cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), Binance Coin (BNB), Cardano (ADA), and Ripple (XRP). Backtesting was performed using Kupiec’s POF test, Kupiec’s TUFF test, Independence test, and Christoffersen’s Interval Forecast test. The results indicate that the Historical Simulation VaR model was the most appropriate model for the cryptocurrency market, as it demonstrated the lowest rejections. Conversely, the Delta Normal VaR and Monte Carlo Simulation VaR models consistently overestimated risk at confidence levels of 95% and 90%, respectively. Despite these results, both models were found to exhibit comparable robustness to the Historical Simulation VaR model.
... The third group studies analyze interest rates. For example, Aharon et al. (2021), Zhang et al. (2021), Aboura (2022), Benigno et al. (2022), and Van Erlach (2022) include different interest rates in their studies. In line with these studies, the US 5-Year Treasury Bond yield is selected as an indicator by considering the leading characteristic of this indicator. ...
This study examines the asymmetric effects of global factors on the returns of cryptocurrencies. In this context, the study focuses on Bitcoin, Ethereum, and Ripple as top-traded cryptocurrencies, considers eight global factors, and uses high-frequency (i.e., daily) data between February 8, 2018, and June 21, 2022. Also, the study applies nonparametric causality in quantiles (NCQ) and quantile-on-quantile regression (QQR) as the main models and quantile regression (QR) as the robustness model. The empirical findings reveal that (i) effects of global factors on the returns of cryptocurrencies are asymmetric and generally positive; (ii) there are nonparametric causal effects from global factors to cryptocurrencies for return and volatility in most quantiles excluding some lower and higher quantiles; (iii) effects of the global factors on cryptocurrencies differentiate according to global factors, cryptocurrencies, and quantiles; (iv) the QR results confirm the robustness of the empirical findings; (v) overall, the outcomes underline the asymmetric and varying effects of global factors on the returns of cryptocurrencies across quantiles. Hence, the results imply that traders and investors should consider the asymmetric effects of global factors on the returns of cryptocurrencies for trading, investment, and hedging purposes. Moreover, some policy recommendations are proposed.
... However, the reality is that cryptocurrencies showed a jumping trend after the Fed took steps to raise interest rates [7]. Meanwhile, a study of a mainstream cryptocurrency, Bitcoin, by Denton Jack and Daren Fonda in May 2022 noted that "fed funds rates have delayed, threshold, higher order, and spillover effects on Bitcoins [8]." These findings reveal that the price of cryptocurrencies is influenced by macro markets and traditional financial products. ...
With the advent of 2022, the impact of the COVID-19 pandemic has weakened, the US labor market has recovered, and inflation has been severe, creating the conditions for the Fed to tighten its policies. At the same time, cryptocurrencies as a hot topic in recent years; ETH is one of the most popular cryptocurrencies in the market; this article aims to assess the impact of the Fed's raised interest rates on the yield and volatility of cryptocurrency Ethereum (ETH) based on data on the ETH price and the US dollar/CNY exchange rate since 2022. And further, simulate the impact on the overall cryptocurrency market. This paper constructs VAR and ARMA-GARCH models to analyze ETH returns and volatility variations. The results of these models suggest that the exchange rate rise triggered by the Fed's rate hike has had a negative impact on ETH yields and increased the volatility of its returns. Further, this article recommends that investors should adjust their portfolios according to their risk appetite in an uncertain market environment.
The financial markets, shaped by dynamic forces, including macroeconomic trends and technological advancements, are influenced by a multitude of factors impacting the S&P 500 stock index, a pivotal indicator in the US equity markets. This paper highlights the significance of understanding the exogenous variables affecting the index’s profitability for academics, portfolio managers, and investment professionals. Amid the global ramifications of the S&P 500, particularly in combating the eroding purchasing power caused by inflation, investing in stock indexes emerges as a means to safeguard wealth. The study employs various statistical techniques, emphasizing a methodical approach to uncover influential variables, and using static regression and autoregressive models for immediate and time-lagged effects. In conclusion, the findings have broad practical implications beyond investment strategy, extending to portfolio construction and risk management. Acknowledging inherent uncertainties in financial market forecasts, future research endeavors should target long-term trends, specific influences, and the impact of exchange rate fluctuations on index evolution. Collaboration across regulatory bodies, academia, and the financial industry is underscored, holding the potential for effective risk monitoring and bolstering overall economic and financial market stability. This research serves as a foundational step towards enhancing market understanding and facilitating more efficient investment decision-making approaches.
