Abstract
The purpose of this paper is to investigate the viability as compared with other financial assets of cryptocurrencies as a currency or as an asset investment. This paper also aims to see which macro variable relates more to the price of cryptocurrencies, especially Bitcoin. Since the whole concept of cryptocurrencies is quite novel, an attempt has been made to briefly explain the underlying blockchain technology that forms the bedrock of cryptocurrencies. In this study, we use secondary data, i.e., the price history of Bitcoin from September 2014 to September 2021 for the last seven years, captured from trading exchanges. We predicted monthly returns of Bitcoin with that of Standard & Poor’s 500 Index (S&P 500), gold, and Treasury Bonds. Our findings show that Bitcoin has very high volatility compared to S&P 500, Gold and Treasury Bonds. Also, our findings show that there is a positive correlation between Bitcoin’s price volatility and the other three financial assets before and during COVID-19. Hence, Bitcoin is acting more as a speculative asset rather than a steady store of value. This can be drawn from the comparison with the debt market i.e., a Treasury Bond that invests in long-dated (30 years) US treasuries with which Bitcoin shows no relationship. The findings of this study could help with understanding the future of Bitcoin. This has important implications for Bitcoin investors. The current study contributes to the extant literature by providing empirical evidence on long-term social sustainability vis-à-vis supply chain traceability.
Highlights
Satoshi Nakamoto, whose true identity has never been revealed, came up in 2009, with the first blockchain network and published a paper that said, “What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party” (Nakamoto 2008)
Bitcoin is often identified as new gold and it is visualised similar to golden capital “B” as digital (Shiller 2020)
As seen from the observations from subjective as well as objective data analysis, cryptocurrencies (Bitcoin) do not appear to perform their function as currency, as a medium of exchange or store of value. They have been too volatile that may lead to deflation in the economy
Summary
Satoshi Nakamoto, whose true identity has never been revealed, came up in 2009, with the first blockchain network and published a paper that said, “What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party” (Nakamoto 2008). This is the origin of cryptocurrencies and to better understand them we need to understand the background of the global financial crisis of 2009 on which they were launched. We run correlation analysis to see if there is any positive or negative among Bitcoin, S&P 500, Gold and TLT(Treasury Bond)
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