Article
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Factors Affecting the Volatility of Bitcoin Prices
Version 1
: Received: 4 December 2023 / Approved: 4 December 2023 / Online: 5 December 2023 (04:24:34 CET)
How to cite: Wu, R.; Hossain, M.A. Factors Affecting the Volatility of Bitcoin Prices. Preprints 2023, 2023120223. https://doi.org/10.20944/preprints202312.0223.v1 Wu, R.; Hossain, M.A. Factors Affecting the Volatility of Bitcoin Prices. Preprints 2023, 2023120223. https://doi.org/10.20944/preprints202312.0223.v1
Abstract
This study employs traditional OLS (ordinary least squares) regression analysis to investigate the influence of various external factors on Bitcoin price fluctuations from January 2014 to March 2023 using a multidimensional approach. We use factors from the traditional financial market, such as economic policy uncertainty (EPU), oil prices, the NASDAQ index, and gold prices, to identify factors contributing to Bitcoin volatility. Considering the unique situation in the Bitcoin market, that is, 24-hour trading and the short duration of its existence, we incorporate the broadest possible data range to achieve alignment between Bitcoin data and other datasets. The findings of the statistical analysis indicate that EPU and the NASDAQ index promote positive fluctuations in Bitcoin volatility, whereas gold prices act as a dampener. However, we find no empirical support for the influence of energy prices on Bitcoin volatility. These results suggest that Bitcoin should not be underestimated; all stakeholders should treat the issue of Bitcoin volatility seriously, including governments, who should actively regulate the Bitcoin market, and investors, who should recognize the dangers of this volatility, making rational decisions based on individual circumstances and employing flexible trading strategies.
Keywords
Bitcoin price volatility; economic policy uncertainty; oil prices; NASDAQ index; gold prices
Subject
Business, Economics and Management, Finance
Copyright: This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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