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Inflation and cryptocurrencies revisited: A time-scale analysis

Author

Listed:
  • Conlon, Thomas
  • Corbet, Shaen
  • McGee, Richard J.

Abstract

This letter revisits the time-series relation between cryptocurrency prices and forward inflation expectations. Using wavelet time-scale techniques, a positive link between cryptocurrencies and forward inflation rates is identified, focused on a brief period surrounding the onset of the COVID-19 pandemic. This coincides with a rapid and synchronized decrease in cryptocurrency prices and forward inflation expectations, followed by a swift recovery to pre-crisis levels. Outside of the crisis period, we find no clear evidence of any inflation hedging capacity of Bitcoin or Ethereum during times of increasing forward inflation expectations.

Suggested Citation

  • Conlon, Thomas & Corbet, Shaen & McGee, Richard J., 2021. "Inflation and cryptocurrencies revisited: A time-scale analysis," Economics Letters, Elsevier, vol. 206(C).
    • Handle: RePEc:eee:ecolet:v:206:y:2021:i:c:s0165176521002731
    DOI: 10.1016/j.econlet.2021.109996
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Inflation expectations; Bitcoin; Ethereum; Hedging; Wavelets; Cryptocurrencies;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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