Bitcoin and Global Political Uncertainty - Evidence from the U.S. Election Cycle

Abstract

In this study, we investigate the impact of political uncertainty on Bitcoin. Introducing the U.S. federal election cycle as a proxy for political uncertainty, we find that (i) an increase in political uncertainty leads to a decrease in Bitcoin return, (ii) political uncertainty has the strongest impact on Bitcoin six and three months prior the election and decreases as the election date approaches, and (iii) the effect is more pronounced in the left and right tail of the distribution. The results shed a new light on the property of Bitcoin being a safe haven asset and provide important information for investors and policymakers.

Keywords: Global political uncertainty, Bitcoin, Quantile regression

JEL Classification: G1, G14, G17