Flight to Bitcoin

This paper uncovers a novel phenomenon, flight-to-Bitcoin, during periods of heightened policy uncertainties. Panel regressions show that Bitcoin premia, turnovers, and Web traffic on cryptocurrency exchanges all increase with economic policy uncertainties. Difference-in-differences tests exploiting local nationwide shocks further confirm this pattern. The phenomenon is driven more by the lack of confidence in local authorities and investors' risk aversion than circumventing capital controls or hedging against market crashes. We argue that the stateless and decentralized nature of BTC renders it a viable alternative investment vehicle for allaying concerns against local authorities amid turbulence.