Cryptocurrencies as a tool for economic policy uncertainty : a quantitative approach
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Date
2024-09-25
Authors
Μαμασούλας, Βίκτωρ
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Abstract
Cryptocurrencies can be used as a way to ease Economic Policy Uncertainty (EPU) and through research we are trying to identify it as a potential. The over-definition of digital assets into global financial markets together with the ideology for being able to use them as safe havens or hedges during times of increased uncertainty in the policy-making arena must be got right. The comprehensive nature of the research evaluation of the past relationships between EPU and the performance of well-known cryptocurrencies such as Bitcoin, Ethereum, and Ripple (XRP) with information obtained from reliable economic data through the employment of smart statistical methods such as time series analysis and econometric modeling assures the success of this paper. The material was drawn from June 2016 and up to June 2024 which witnessed the most impactful economic recessions, regulation changes, and geopolitical events, thereby allowing the revelation of patterns in this context through the use of them. In simple terms, the results indicate that digital asset valuation experiences more turbulence when EPU is high, while it is presented with traits that show potential to hedge, but it should be noted that the exploration conducted in this investigation does not imply the effectiveness of cryptocurrencies in their role as hedging instruments but rather sets the groundwork for future exploration related to
their prognostic power into EPU. Moreover, this paper examines the duality of the EPU and cryptocurrencies, not just in the way that a particular digital currency at a particular date may have a lasting effect on the future EPU but also in the way that EPU can actually move the cryptocurrency prices. The two cardinal rules must be of equal weight because they are pertinent to the interrelationship between these variables, which presupposes thorough examination if a
comprehensive apprehension of the subject is to be achieved.
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Keywords
Economic policy uncertainty, Cryptocurrencies, Bitcoin, Ethereum, Ripple