A time–frequency comovement and causality relationship between Bitcoin hashrate and energy commodity markets

Abstract

This study examines time–frequency relationship between Bitcoin prices and Bitcoin mining based on daily data from January 2013 to October 2018. Bitcoin mining is measured through Bitcoin hashrate, which represents the completion speed of the Bitcoin code. We also include three energy commodities, i.e. oil, coal, and gas in a multivariate model employing time–frequency wavelet extensions in the form of partial and multivariate models. Results of our study suggest that both oil and gas lead Bitcoin returns from mid 2014 till 2016 across 64– 128 days' period. Under the investment period of 64– 256, hashrate and Bitcoin returns share significant comovement in the presence of oil and natural gas however exhibit no comovement when the effect of coal market is considered. Our results of wavelet decomposition suggest that the magnitude of comovement ranging from short- to long-run is time varying. Finally, results of the causality on quantile test suggest that Bitcoin returns cause changes in Bitcoin hashrate mostly during median quantiles with an asymmetric pattern. Our work entail implications for investors in the Bitcoin and energy market and is also helpful in forecasting the pricing behavior of Bitcoin using the hashrate and vice versa.