Asymmetric determinants of Bitcoin's wild price movements

Abstract

Purpose

The present work endeavors to explore the potential nonlinear and asymmetric effects of supply fundamental properties of Bitcoin mining process (velocity, size and stock of Bitcoins, cost of production and mining revenue), DJIA, VIX, economic policy uncertainty and Google Trend on the price of Bitcoin (PB).

Design/methodology/approach

The authors apply the Nonlinear Autoregressive Distributed lag (NARDL) approach for the period from November 31, 2013 to December 30, 2020.

Findings

The asymmetric effects of inflation, the size of Bitcoin economy, reveal a positive impact on the PB in the short and long run. In the short run, Bitcoin price shows negative statistically significant sensitivity to positive (negative) changes in DJIA (VIX) index. In addition, Google Trends have an impact on Bitcoin prices indicating that the Bitcoin market is also driven by investors' sentiments. In the long run, negative policy uncertainty shocks increase the PB while in the short run, negative shocks decrease it.

Originality/value

The authors give credence to the best ways of understanding the existence of asymmetries in the link between the PB and a number of influential macro-finance variables to improve the appropriate asset allocation and portfolio management.

Citation

Benlagha, N. and Hemrit, W. (2023), "Asymmetric determinants of Bitcoin's wild price movements", Managerial Finance, Vol. 49 No. 2, pp. 227-247. https://doi.org/10.1108/MF-03-2022-0105