Abstract
Most previous studies focusing on the effect of the economic policy uncertainty (EPU) on the Bitcoin price do not assess for market conditions and assume that this effect is symmetric. To address this limitation, this paper investigates the causality running from EPU to Bitcoin returns and volatility in the top-10 countries running Bitcoin nodes under different market conditions. To do so, we employ the symmetric and asymmetric causality in-quantiles test. Results report that the EPU improves the prediction of Bitcoin returns in the majority of countries under extreme market conditions. However, the EPU causes Bitcoin volatility at the intermediate and high quantiles. Further analysis considering the asymmetric causality in quantiles suggests that the causality running from EPU to the Bitcoin returns is sourced from increased EPU levels (positive variations), while the decrease in EPU (negative variations) is the source of causality from EPU to Bitcoin volatility. Our results have important implications for investors and policymakers operating in the cryptocurrency market, particularly in portfolio design and risk management.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
