Analysis of the Causal Relationship between Bitcoin and Hard Currency
Abstract
Bitcoin is one of the most popular and highest-volume Cryptocurrency transactions in the world. Bitcoin is not only used as a payment instrument but also as an investment medium across countries. The openness of trade and integration of financial systems between countries will affect the demand and supply of the world's strong currencies (hard currencies) such as the Dollar, Pound sterling, Euro, Yen, and Yuan. The purpose of this study is to test the two-way causal relationship between Bitcoin and hard currency. This research uses a descriptive quantitative approach. The analysis method was used to determine the relationship between variables through the Johansen cointegration test, causality test with Engel Granger test, and Vector Error Correction Models (VECM). The results of this study indicate that Bitcoin has a long-term equilibrium relationship with the Dollar, Pound sterling, Euro, Yen, and Yuan currencies. However, there is no causality or feedback relationship between Bitcoin and hard currency and vice versa.
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Al-Yahyaee, Khamis Hamed, Walid Mensi, and Seong-Min Yoon. 2018. “Efficiency, Multifractality, and the Long-Memory Property of the Bitcoin Market: A Comparative Analysis with Stock, Currency, and Gold Markets.” Finance Research Letters 27:228–34.
Almudhaf, Fahad. 2018. “Pricing Efficiency of Bitcoin Trusts.” Applied Economics Letters 25(7):504–8.
Baek, C., and M. Elbeck. 2015. “Bitcoins as an Investment or Speculative Vehicle? A First Look.” Applied Economics Letters 22(1):30–34.
Balcilar, Mehmet, Elie Bouri, Rangan Gupta, and David Roubaud. 2017. “Can Volume Predict Bitcoin Returns and Volatility? A Quantiles-Based Approach.” Economic Modelling 64:74–81.
Baur, Dirk G., KiHoon Hong, and Adrian D. Lee. 2018. “Bitcoin: Medium of Exchange or Speculative Assets?” Journal of International Financial Markets, Institutions and Money 54:177–89.
Bitcoin.chart. (2020). Retrieved from https://charts.bitcoin.com/#cat-market.
Böhme, Rainer, Nicolas Christin, Benjamin Edelman, and Tyler Moore. 2015. “Bitcoin: Economics, Technology, and Governance.” 29(2):213–38.
Bouri, Elie, Rangan Gupta, Aviral Kumar Tiwari, and David Roubaud. 2017. “Does Bitcoin Hedge Global Uncertainty? Evidence from Wavelet-Based Quantile-in-Quantile Regressions.” Finance Research Letters 23:87–95.
Bouoiyour, J., & Selmi, R. (2015). What Does Bitcoin Look Like? Annals of Financial Economics (AFE), Vol. 10, Issue 01.
Coinmarket. (2020). Cryptocurrency Market Capitalization. Retrieved from https://coinmarket.com/.
Cheah, Eng-Tuck, and John Fry. 2015. “Speculative Bubbles in Bitcoin Markets? An Empirical Investigation into the Fundamental Value of Bitcoin.” Economics Letters 130:32–36.
Cheah, Eng Tuck, Tapas Mishra, Mamata Parhi, and Zhuang Zhang. 2018. “Long Memory Interdependency and Inefficiency in Bitcoin Markets.” Economics Letters 167(February):18–25.
Cheung, Adrian and Roca, Eduardo and Su, Jen-Je. 2013. “Crypto-Currency Bubbles : An Application of the Phillips-Shi–Yu (2013) Methodology on Mt. Gox Bitcoin Prices Adrian (Wai-Kong) Cheung * • , Eduardo Roca and Jen-Je Su *.” Applied Economics 47(23):2348–58.
Corbet, Shaen, Brian Lucey, and Larisa Yarovaya. 2018. “Datestamping the Bitcoin and Ethereum Bubbles.” Finance Research Letters 26:81–88.
Dabrowski, Marek. 2018. Mata Uang Virtual Dan Potensi Dampaknya Di Pasar Keuangan Dan Kebijakan Moneter. Vol. 495.
Demir, Ender, Giray Gozgor, Chi Keung Marco Lau, and Samuel A. Vigne. 2018. “Does Economic Policy Uncertainty Predict the Bitcoin Returns? An Empirical Investigation.” Finance Research Letters 26:145–49.
Dwyer, Gerald P. 2015. “The Economics of Bitcoin and Similar Private Digital Currencies.” Journal of Financial Stability 17:81–91.
Dyhrberg, Anne Haubo. 2016. “Bitcoin, Gold and the Dollar – A GARCH Volatility Analysis.” Finance Research Letters 16:85–92.
Edwards, Sebastian. 1988. Wp506.Pdf. 506.
European Banking Authority. 2014. “EBA Opinion on Virtual Currencies.” European Banking Authority (EBA/Op/2014/08):46.
Engel, R. F., & Granger, C. J. (1987). Cointegration and Error Correction Representation, Estimation and Testing. Econometrika, 55.
Erdas, M. L., & Caglar, A. E. (2018). Analysis of the relationships between Bitcoin and exchange rate, commodities and global indexes by asymmetric causality test. Eastern Journal of European Studies Vol. 9 Issue. 2 December 2018.
Feng, Wenjun, Yiming Wang, and Zhengjun Zhang. 2018. “Can Cryptocurrencies Be a Safe Haven: A Tail Risk Perspective Analysis.” Applied Economics 50(44):4745–62.
Gustav Cassel. 1924. “Review Reviewed Work ( s ): Money and Foreign Exchange after 1914 by Gustav Cassel Review by : William A . Scott Source : The American Economic Review , Mar ., 1924 , Vol . 14 , No . 1 ( Mar ., 1924 ), Pp . 120- Published by : American Economic Associatio.” 14(1):120–25.
Konstantinos, Gkillas, and Paraskevi Katsiampa. 2020. “An Application of Autoregressive Extreme Value Theory to Cryptocurrencies.” Singapore Economic Review 109–11.
Krugman, P. R., & Obstfeld, M. (2003). International Economics: Theory And Policy. Jakarta: Raja Grafindo Persada.
Lahsasna, Ahcene. 2013. Maqasid Al-Shari’ah in Islamic Finance / Dr. Ahcene Lahsasna. Kuala Lumpur: IBFIM, 2013.
Madura. (1993). Financial Management. Florida University Express.
Mankiw N, G. (2006). Makro Ekonomi, Terjemahan: Fitria Liza, Imam Nurmawan, jakarta: Penerbit Erlangga 2006.
Muhammad, M. (2014). Kointegrasi dan Estimasi ECM Pada Data Time Series. Jurnal
Meera, Ahmad Kameel Mydin. 2018. “Cryptocurrencies From Islamic Perspectives: The Case Of Bitcoin.” Buletin Ekonomi Moneter Dan Perbankan 20(4):443–60.
Narayan, Paresh Kumar, Seema Narayan, R. Eki Rahman, and Iwan Setiawan. 2019. “Bitcoin Price Growth and Indonesia’s Monetary System.” Emerging Markets Review 38(18):364–76.
Nelson, Bill. 2018. “Financial Stability and Monetary Policy Issues Associated with Digital Currencies.” Journal of Economics and Business 100:76–78.
Konvergensi Vol. 4 No. 1, April 2014.
Nopirin. (2014). Pengantar Ilmu Ekonomi Mikro-Makro. Yogyakarta: BPFE-Yogyakarta.
Peters, Gareth W., Ariane Chapelle, and Efstathios Panayi. 2016. “Opening Discussion on Banking Sector Risk Exposures and Vulnerabilities from Virtual Currencies: An Operational Risk Perspective.” Journal of Banking Regulation 17(4):239–72.
Phillip, Andrew, Jennifer Chan, and Shelton Peiris. 2019. “On Long Memory Effects in the Volatility Measure of Cryptocurrencies.” Finance Research Letters 28:95–100.
Pieters, Gina, and Sofia Vivanco. 2017. “Financial Regulations and Price Inconsistencies across Bitcoin Markets.” Information Economics and Policy 39:1–14.
Putra, Muhammad Deni. 2017. “Maqasid Al Shari’Ah Dalam Keuangan Islam (Tinjauan Teoritis Atas Pemikiran Dr Ahcene Lahsasna).” ILTIZAM Journal of Sharia Economic Research 1(1):61.
Siswantoro, Dodik, Rangga Handika, and Aria Farah Mita. 2020. “The Requirements of Cryptocurrency for Money, an Islamic View.” Heliyon 6(1):e03235.
Śmiech, Sławomir, and Monika Papież. 2017. “In Search of Hedges and Safe Havens: Revisiting the Relations between Gold and Oil in the Rolling Regression Framework.” Finance Research Letters 20:238–44.
Szetela, B., Mentel, G., & Gedek, S. (2018). Dependency Analysis between Bitcoin and Selected Global Currencies. Dynamic Economics Model Vol. 18 (2018) 133-144.
Uiterwijk, V. (2013). Bitcoin: Het samenstellen van een efficiente markt portfolio met Bitcoin. BSc Economics & Business, Erasmus School of Economics, Erasmus University Rotterdam.
Published
2024-01-05
How to Cite
Hayet, H., Achmad, A., & Bustami, B. (2024). Analysis of the Causal Relationship between Bitcoin and Hard Currency. Annual International Conference on Islamic Economics and Business (AICIEB), 3, 257-273. https://doi.org/https://doi.org/10.18326/aicieb.v3i0.460
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