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Jumps in geopolitical risk and the cryptocurrency market: the singularity of bitcoin/ Elie Bouri, Rangan Gupta & Xuan Vinh Vo

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BOURI Elie

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In: Defence and Peace Economics Vol 33, No. 2, March 2022, pp.150-161Summary: Are price discontinuities in cryptocurrencies jointly related to large swings in geopolitical risk? This is a relevant question to answer given recent news from the press that Bitcoin's price jumps are driven by jumps in the level of geopolitical risk index. To answer this question, we examine first the jump incidence of daily returns for Bitcoin and other leading cryptocurrencies and then study the co-jumps between cryptocurrencies and the geopolitical risk index using logistic regressions. Our dataset is at the daily frequency and covers the period 30 April 2013 to 31 October 2019. The results show that the price behaviour of all cryptocurrencies under study is jumpy but only Bitcoin jumps are dependent on jumps in the geopolitical risk index. This revealed evidence of significant co-jumps for the case of Bitcoin only nicely complements previous studies arguing that Bitcoin is a hedge against geopolitical risk.

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Item type	Current library	Call number	Copy number	Status	Date due	Barcode
Journal Article	Mindef Library & Info Centre Journals	POLITICS (Browse shelf(Opens below))	1	Not for loan		69121.1001

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Are price discontinuities in cryptocurrencies jointly related to large swings in geopolitical risk? This is a relevant question to answer given recent news from the press that Bitcoin's price jumps are driven by jumps in the level of geopolitical risk index. To answer this question, we examine first the jump incidence of daily returns for Bitcoin and other leading cryptocurrencies and then study the co-jumps between cryptocurrencies and the geopolitical risk index using logistic regressions. Our dataset is at the daily frequency and covers the period 30 April 2013 to 31 October 2019. The results show that the price behaviour of all cryptocurrencies under study is jumpy but only Bitcoin jumps are dependent on jumps in the geopolitical risk index. This revealed evidence of significant co-jumps for the case of Bitcoin only nicely complements previous studies arguing that Bitcoin is a hedge against geopolitical risk.

POLITICS

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