The Impact of US Macroeconomic Factors on Bitcoin Prices: A Vector Auto-Regression (VAR) Model Analysis

Abstract

Having emerged as a significant asset in the global financial landscape, particularly in the past decade, Bitcoin not only offers a decentralized alternative to financial traditions, but also potential for speculating and value storing. As Bitcoin matures, its impact on financial markets also grows rapidly, making it a critical subject for study. This paper focuses on the impact of seven selected key U.S. macroeconomic factors on Bitcoin prices by running a Vector Auto-Regression (VAR) model and performing Impulse Response Function (IRF) analyses. The indicators aim to stand for macroeconomic aspects including monetary policies, economic and market performance, inflation, commodity prices, and currency value. After obtaining quarterly time series from 2010 to 2024, a VAR model was utilized, attempting to capture dynamic relationships and lagged effects between the variables. The findings are expected to offer insights into Bitcoin’s dynamic interactions with macroeconomic conditions and prospects, especially for investors considering Bitcoin as a potential hedge in their portfolio and researcher interested in related topics.