Abstract
This paper probes the interrelationship between Bitcoin price (BP) and the U.S. partisan conflict (PC) by performing the bootstrap full- and sub-sample Granger causality tests. The positive influence from PC to BP reveals that Bitcoin can be considered as a tool to avoid the uncertainty caused by the rise in PC. However, this view cannot be supported by the negative impact, the major reason is that the burst of bubble undermines the hedging ability of Bitcoin. The above results are inconsistent with the intertemporal capital asset pricing model (ICAPM), underlining that high PC may drive BP to rise, in order to compensate for the losses and costs from factionalism. Conversely, BP has a negative impact on PC, suggesting that the U.S. political situation can be reflected by the Bitcoin market. Under the circumstance of the fiercer factionalism in the U.S., this investigation can benefit investors and related authorities.
Highlights
The primary target is to quest whether Bitcoin is the winner after the U.S factionalism, indicating that Bitcoin can be viewed as a tool to avoid uncertainty caused by partisan conflict (PC)
This paper investigates the mutual influence between the Bitcoin market and the U.S political situation, and further, verify whether Bitcoin is the winner after the U.S factionalism
The positive effect reveals that Bitcoin can be viewed as a tool to avoid the uncertainty of high PC, due to Bitcoin price (BP) will increase under the environment with high factionalism
Summary
The primary target is to quest whether Bitcoin is the winner after the U.S factionalism, indicating that Bitcoin can be viewed as a tool to avoid uncertainty caused by partisan conflict (PC). The correlation between BP and PC gives lessons to investors, they can store Bitcoin or consider it as an asset in the portfolio if the U.S factionalism is fierce, in order to reduce the investment risks and enhance their returns. They must pay attention to the Bitcoin bubbles and avoid blind speculation. This interaction provides insights to the related authorities, they can prevent the large fluctuations in BP to ensure the stable development of the Bitcoin market, as well as reduce the uncertainty in the society to achieve the national stable growth.
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