Research on the Impact Mechanism of Economic Policy Uncertainty on Bitcoin Prices

Abstract

Has there been a linkage mechanism between the prices of Bitcoin and traditional wealth preservation investment tools, that is, Bitcoin may serve as an investment substitute when other investment tool markets are sluggish, or can also benefit from it when the overall investment market is hot. The price of Bitcoin exhibits extremely unstable characteristics, as it can double its value dozens of times in a very short period of time or return to its starting point in a single day. The rapid rise and short duration of Bitcoin's price show us its infinite potential. Through research, this paper finds that the price of Bitcoin fluctuates greatly, while the U.S. Dollar Index and the S&P 500 index are basically horizontal, and their volatility is relatively small. Therefore, Bitcoin may be used as a speculative product, and there is a lot of speculative behavior in the market. When the investment attributes of Bitcoin dominate, an increase in economic policy uncertainty will significantly suppress investor sentiment and cause Bitcoin prices to decline. In addition, its impact on the world financial system is also increasing.