The Quantitative Easing Bursts Bitcoin Price

Accounting and Finance Research, Vol. 10, No. 3; 2021. https://doi.org/10.5430/afr.v10n3p65

7 Pages Posted: 11 Oct 2021

See all articles by Marco Patacca

Marco Patacca

University of Verona - Department of Economics

Sergio M. Focardi

Ecole Superieure d'Ingenierie Leonard de Vinci (ESILV)

Date Written: August 21, 2021

Abstract

In this paper we analyze the existence of cointegrating relationships between Bitcoin, S&P 500, and the quantity of money M2. We perform our analysis with and without applying time warping pre processing. In all cases we find strong evidence that, in the period 2016-2021 the three time series show two cointegrating relationships and therefore share a common stochastic trend. In addition, a low correlation between Bitcoin and S&P 500 is detected. These finding justify the increased interest of investors in Bitcoin as an alternative asset class. The economic interpretation is that the stock valuation is primarily determined by financial phenomena, in particular the availabili ty of large quantity of money. Money supporting investment is due both to the actions of Quantitative Easing and to the exchange of creditor/debtor role that took place between households and firms. The price of both Bitcoin and stocks is increasingly influenced by the amount of money in circulation and follows the same stochastic trend.

Keywords: quantitative easing, monetary policy, bitcoin, cryptocurrencies, cointegration

JEL Classification: C22, C54, C58

Suggested Citation

Patacca, Marco and Focardi, Sergio M., The Quantitative Easing Bursts Bitcoin Price (August 21, 2021). Accounting and Finance Research, Vol. 10, No. 3; 2021. https://doi.org/10.5430/afr.v10n3p65, Available at SSRN: https://ssrn.com/abstract=3920808

Marco Patacca (Contact Author)

University of Verona - Department of Economics ( email )

Via dell'Artigliere, 8
37129 Verona
Italy

Sergio M. Focardi

Ecole Superieure d'Ingenierie Leonard de Vinci (ESILV)

92916 Paris La Defense Cedex
France

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