When Bitcoin is High: Cryptocurrency Value, Illicit Markets, and US Marijuana Bills

19 Pages Posted: 31 Oct 2022 Last revised: 25 Jan 2023

See all articles by Savva Shanaev

Savva Shanaev

Northumbria University

Efan Johnson

Northumbria University

Mikhail Vasenin

Northumbria University

Binam Ghimire

Robert Gordon University - Aberdeen Business School; University of Northumbria at Newcastle

Date Written: October 21, 2022

Abstract

This study utilises a dataset of 58 state-level marijuana decriminalisation and legalisation bills and referenda in the United States in 2010-2022 to estimate the implications of illicit market use for the value of Bitcoin in an event studies framework. Decriminalisation is associated with a strong and consistent positive Bitcoin price response around the event, recreational legalisation induces a more ambiguous reaction, and medical legalisation is found to have a negative albeit small impact on Bitcoin value. The effects are robust to various estimation windows, in subsamples, and when outliers, heavy tails, conditional heteroskedasticity, and state size are accounted for. The findings confirm that shadow economy use as a medium of exchange contributes to the market value of cryptocurrencies which has substantial implications for cryptocurrency investors and policymakers.

Keywords: Bitcoin, cannabis, illicit market, shadow economy, event study

JEL Classification: G14, G18, K42

Suggested Citation

Shanaev, Savva and Johnson, Efan and Vasenin, Mikhail and Ghimire, Binam, When Bitcoin is High: Cryptocurrency Value, Illicit Markets, and US Marijuana Bills (October 21, 2022). Available at SSRN: https://ssrn.com/abstract=4255142 or http://dx.doi.org/10.2139/ssrn.4255142

Savva Shanaev (Contact Author)

Northumbria University ( email )

Pandon Building
208, City Campus East-1
Newcastle-Upon-Tyne, Newcastle NE1 8ST
United Kingdom

Efan Johnson

Northumbria University ( email )

Newcastle Upon Tyne
Newcastle Upon Tyne, NE1 8ST
United Kingdom

Mikhail Vasenin

Northumbria University ( email )

Pandon Building
208, City Campus East-1
Newcastle-Upon-Tyne, Newcastle NE1 8ST
United Kingdom

Binam Ghimire

Robert Gordon University - Aberdeen Business School ( email )

Garthdee Road
Aberdeen AB10 7QE
United Kingdom

HOME PAGE: http://www.banksandmarkets.wordpress.com

University of Northumbria at Newcastle ( email )

Aberdeen Business School, Robert Gordon University
Garthdee House, Garthdee Road
Aberdeen, AK Scotland NE1 8ST
United Kingdom

HOME PAGE: http://www.banksandmarkets.wordpress.com

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