Do crypto investors wait and see during policy uncertainty? An examination of the dynamic relationships between policy uncertainty and exchange inflows of Bitcoin
ISSN: 1940-5979
Article publication date: 11 April 2023
Issue publication date: 5 March 2024
Abstract
Purpose
In this paper, the authors examine the short-term and long-term impact of general economic policy uncertainty (EPU) and crypto-specific policy uncertainty on Bitcoin’s (BTC) exchange inflows – a form of crypto investor behaviors that the authors expect to drive the cryptocurrency volatility.
Design/methodology/approach
The authors use an autoregressive distributed lag (ARDL), coupled with the bounds testing approach by Pesaran et al. (2001), to analyze a weekly dataset of BTC’s exchange inflows and relevant policy uncertainty indices.
Findings
The authors observe both short-term and long-term impacts of the crypto-specific policy uncertainty on BTC’s exchange inflows, whereas the general EPU only explains these inflows in a short-term manner. In addition, the authors find exchange inflows of BTC “Granger” cause its price volatility. Furthermore, the authors document a significant and relatively persistent response of BTC volatility to shocks to its exchange inflows.
Originality/value
This study’s findings offer significant contributions to research in policy uncertainty and investor behaviors.
Keywords
Acknowledgements
The authors would like to thank College of Business and Law, RMIT University, Melbourne, for generously providing us the research grant (the 2021 CoBL research grant).
Citation
Nguyen, L.T.M. and Nguyen, P.T. (2024), "Do crypto investors wait and see during policy uncertainty? An examination of the dynamic relationships between policy uncertainty and exchange inflows of Bitcoin", Review of Behavioral Finance, Vol. 16 No. 2, pp. 234-247. https://doi.org/10.1108/RBF-01-2023-0013
Publisher
:Emerald Publishing Limited
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