Estimating the reaction of Bitcoin prices to the uncertainty of fiat currency

【Author】 Jin, Xuejun; Zhu, Keer; Yang, Xiaolan; Wang, Shouyang

【Source】RESEARCH IN INTERNATIONAL BUSINESS AND FINANCE

【影响因子】6.143

【Abstract】Recent studies have found that investors move from fiat currencies to Bitcoin cryptocurrency in environments with low trust and high uncertainty. This paper investigates the reaction of Bitcoin prices to uncertainty concerning fiat currencies by introducing a complete ensemble empirical mode decomposition with adaptive noise (CEEMDAN)-based event analysis approach. The 2013 Cyprus bailout is used as an event over the uncertainty of fiat currencies. With the proposed approach, the original Bitcoin price series is decomposed into high-frequency, low-frequency, and trend components, thus disentangling the short-, medium-, and long-term effects of the events on Bitcoin prices, respectively. We find that the low-frequency component is dominant and increased because of the event. In addition, the announcement significantly increased the intensity of shortterm fluctuations in Bitcoin prices. However, there was no structural change in Bitcoin prices in the long-term trend. This paper provides a way to show the reaction of Bitcoin prices to the uncertainty of fiat currencies at different time scales and suggests that the reaction is mainly captured by the medium-term trend.

【Keywords】Bitcoin; Fiat currency; Empirical mode decomposition; Event analysis

【发表时间】2021 DEC

【收录时间】2022-01-01

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