The impact of global news items on bitcoin volatility

Abstract

This study examines the temporary impact of major global news on bitcoin absolute price changes from 2018 to 2023, focusing on information related to the COVID-19 pandemic, inflation, and the Russia-Ukraine conflict. Using Bloomberg news and high-frequency data, the analysis is conducted in two stages. First, hourly price data and only highly significant news are analysed over the entire period. Second, second-by-second data from the CME Bitcoin Real Time Index (BRTI) is employed for key dates, incorporating broader news categories. The results show that bitcoin investors need approximately 45 minutes to process each news item on COVID-19 and war as information continuously flows into the market. This constant information processing enables investors to anticipate highly significant news on these topics up to two hours before its publication. Conversely, inflation-related news exhibits concentrated effects around scheduled release times. The findings highlight the necessity of selecting appropriate time frequencies for the analysis to avoid misinterpretation. Overall, the study highlights the significant impact that relevant global news has on bitcoin price volatility, suggesting that bitcoin markets are becoming increasingly integrated with traditional financial markets.