Geopolitical Risks and Cryptocurrency Returns
54 Pages Posted: 13 May 2024
Date Written: October 08, 2024
Abstract
This study examines how global geopolitical risks, threats, and acts impact the daily returns of ten major cryptocurrencies (BTC, ETH, USDT, XRP, BNB, USDC, BCH, DOGE, LTC, ADA). The statistically significant results that are robust to the consideration of alternative model specifications and control variables suggest that there is strong evidence for (i) ETH, XRP, BNB and BCH responding negatively to the shocks of geopolitical risks, (ii) BTC, ETH, BNB, BCH, LTC and ADA responding negatively to the shocks of geopolitical threats, and (iii) all ten cryptocurrencies not responding to the shocks of geopolitical acts. As these ten cryptocurrencies do not respond positively to any of the three shocks in a robust and statistically significant way either, it is implied that none of them offer a reliable hedge against geopolitical risks.
Keywords: Geopolitical Risks, Cryptocurrency Returns, Local Projections Method
JEL Classification: C32, G15, G41
Suggested Citation: Suggested Citation