Flight to Bitcoin

Yu, Gloria Yang; Zhang, Jinyuan

doi:10.2139/ssrn.3278469

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Flight to Bitcoin

90 Pages Posted: 7 Nov 2018 Last revised: 11 Feb 2022

See all articles by Gloria Yang Yu

Gloria Yang Yu

Singapore Management University - Lee Kong Chian School of Business

Jinyuan Zhang

UCLA Anderson School of Management

Date Written: February 10, 2022

Abstract

This paper uncovers an overlooked motivation of Bitcoin investment: investors hold Bitcoin as an asset on which government authorities have limited influence. Consistent with this motivation, we document a flight-to-Bitcoin (FTB) phenomenon whereby local demand for Bitcoin increases with local economic policy uncertainties and Bitcoin ownership shifts from centralized exchanges to decentralized wallets amid such turbulence. FTB is driven by investors’ lack of confidence in government as FTB is stronger in countries where the confidence in government is low and corruption incidents surge. Finally, a comparison with safe-haven assets further differentiates FTB from flight-to-safety.

Keywords: Cryptocurrency, Bitcoin, Capital controls, Economics policy uncertainty, Foreign exchange

JEL Classification: D40, D84, G12, G14

Suggested Citation: Suggested Citation

Yu, Gloria Yang and Zhang, Jinyuan, Flight to Bitcoin (February 10, 2022). Available at SSRN: https://ssrn.com/abstract=3278469 or http://dx.doi.org/10.2139/ssrn.3278469