IS THE CRYPTOCURRENCY POLICY UNCERTAINTY A DETERMINANT OF BITCOIN’S PRICE?

Abstract

This study attempts to answer the question: “Is the Cryptocurrency Policy Uncertainty (UCRY Policy) a determinant of the Bitcoin’s price (BTC)?”. Besides, this study uses these factors as explanatory variables for the BTC movements alongside the UCRY Policy and control variables such as the velocity of the Bitcoin in circulation (BC), the computational power of Bitcoin (HR), popularity (PO), and exchange rate (EX). In the study, December 30, 2013- February 21, 2021, was determined as the term and weekly data were investigated. The ARDL bounds testing method was used to determine the relationship between the variables. According to empirical findings, this study suggests that the UCRY Policy is essential to the BTC. There is a negative relationship between UCRY Policy and BTC. When UCRY Policy increases, BTC decreases, holding other variables constant. Besides, this study shows that control variables can be used as determinants of BTC. In long run, BC and HR have a significant, positive relationship with BTC. The EX has a significant, negative relationship with BTC. The PO has a significant, positive relationship with BTC in the short run. In addition, this study demonstrates that UCRY Policy can be used as a type of uncertainty index for Bitcoin.