Spillover effect of the geopolitical uncertainty on the cryptocurrency market

IF 3.8 Q2 BUSINESS EuroMed Journal of Business Pub Date : 2024-08-07 DOI:10.1108/emjb-01-2024-0021
Saliha Theiri
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Abstract

Purpose

This study aims to examine the influence of geopolitical uncertainty on cryptocurrency markets (CM).

Design/methodology/approach

Utilizing two distinct sets of daily returns data spanning from January 1, 2019, to May 4, 2023, the analysis employs the geopolitical risk (GPR) index formulated by Caldara and Iacoviello (2022), which encapsulates two pivotal events: the COVID-19 pandemic and the Russia–Ukraine conflict. The cryptocurrency market (CM) encompasses Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and Dogecoin (DOGE). Employing the DCC-GARCH model and supplementing it with wavelet coherence analysis to discern perceptual distinctions between short- and long-term market reactions.

Findings

The main findings indicate that the GPR index clearly impacts the return of CM in the short-, mid- and long-term periods. BTC exhibited the highest volatility in response to changes in the GPR index. The cryptocurrency market offers a better diversification opportunity, and the impact of geopolitical events varies across time, with their direction and magnitude closely related to the specificity of the CM.

Practical implications

This research is helpful for financial market investors, portfolio and risk managers, make informed decisions about including cryptocurrencies in their investment portfolios to mitigate the risks in uncertainty period.

Originality/value

Cryptocurrency market volatility is treated weakly during the risk period. With advanced statistical method, this study links two important events: the COVID-19 pandemic and the Russia–Ukraine conflict and selects the top four cryptocurrencies constituting 80% of the market. This study examines the impact of geopolitical risk on the cryptocurrency market and shows that this market is considered a safe haven.

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地缘政治不确定性对加密货币市场的溢出效应
本研究旨在研究地缘政治不确定性对加密货币市场(CM)的影响。设计/方法/途径利用从 2019 年 1 月 1 日到 2023 年 5 月 4 日的两组不同的每日回报数据,分析采用了 Caldara 和 Iacoviello(2022 年)制定的地缘政治风险(GPR)指数,该指数囊括了两个关键事件:COVID-19 大流行和俄罗斯-乌克兰冲突。加密货币市场(CM)包括比特币(BTC)、以太坊(ETH)、莱特币(LTC)和狗狗币(DOGE)。采用 DCC-GARCH 模型,并辅以小波相干性分析,以发现短期和长期市场反应之间的感性区别。研究结果主要结果表明,GPR 指数在短期、中期和长期明显影响 CM 的回报。BTC 对 GPR 指数变化的反应波动最大。加密货币市场提供了更好的多样化机会,地缘政治事件的影响在不同时期各不相同,其方向和幅度与 CM 的特殊性密切相关。本研究有助于金融市场投资者、投资组合和风险管理者做出明智决策,将加密货币纳入投资组合,以降低不确定时期的风险。本研究采用先进的统计方法,将 COVID-19 大流行和俄乌冲突这两个重要事件联系起来,并选出了占市场 80% 的前四种加密货币。本研究探讨了地缘政治风险对加密货币市场的影响,并表明该市场被视为避风港。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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来源期刊
CiteScore
9.80
自引率
19.20%
发文量
61
期刊介绍: The EuroMed Journal of Business (EMJB) is the premier publication facilitating dialogue among researchers from Europe and the Mediterranean. It plays a vital role in generating and disseminating knowledge about various business environments and trends in this region. By offering an up-to-date overview of emerging business practices in specific countries, EMJB serves as a valuable resource for its readers. As the official journal of the EuroMed Academy of Business, EMJB is committed to reflecting the economic growth seen in the European-Mediterranean region. It aims to be a focused and targeted business journal, highlighting environmental opportunities, threats, and marketplace developments in the area. Through its efforts, EMJB promotes collaboration and open dialogue among diverse research cultures and practices. EMJB serves as a platform for debating and disseminating research findings, new research areas and techniques, conceptual developments, and practical applications across various business segments. It seeks to provide a forum for discussing new ideas in business, including theory, practice, and the issues that arise within the field.
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