Cryptocurrencies and financial uncertainty

Abstract

The research question of this bachelor thesis is how and to what extent financial markets influence cryptocurrencies returns. Standard time series methods are applied to five major cryptocurrencies and selected financial variables. These include the Financial Uncertainty Index, the Financial Regulatory Policy Un- certainty, the Consumer Price Index for All Urban Consumers, the Dow Jones Industrial Average, and the Effective Federal Funds Rate. The main result shows that a shock to financial uncertainty has a short-term impact on the crypto market. In addition, the results demonstrate the explanatory power of stock markets for cryptocurrencies, which is consistent with the existing lit- erature. Due to the small sample size, the results should be interpreted with caution. JEL Classification C32, C58, G15, G40 Keywords Cryptocurrencies, Vector autoregression, Granger causality, Impulse Response, Volatility index, Financial Uncertainty Title Cryptocurrencies and financial uncertainty Author's e-mail 92832064@fsv.cuni.cz Supervisor's e-mail barunik@fsv.cuni.cz