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The Link between Bitcoin Price Changes and the Exchange Rates in European Countries with Non-Euro Currencies

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Listed:
  • Bogdan Andrei Dumitrescu

    (“Victor Slăvescu” Centre for Financial and Monetary Research, Calea 13 Septembrie, 050711 Bucharest, Romania)

  • Carmen Obreja

    (Department of Money and Banking, Faculty of Finance and Banking, Bucharest University of Economic Studies, 010961 Bucharest, Romania)

  • Ionel Leonida

    (“Victor Slăvescu” Centre for Financial and Monetary Research, Calea 13 Septembrie, 050711 Bucharest, Romania)

  • Dănuț Georgian Mihai

    (Doctoral School of Finance, Faculty of Finance and Banking, Bucharest University of Economic Studies, 010961 Bucharest, Romania)

  • Ludovic Cosmin Trifu

    (Doctoral School of Finance, Faculty of Finance and Banking, Bucharest University of Economic Studies, 010961 Bucharest, Romania)

Abstract

This paper contributes to the literature dedicated to the interlinkages between cryptocurrencies and currencies by investigating whether Bitcoin price movements affect the exchange rates of a sample of nine European countries with non-euro currencies. By resorting to the novel unconditional quantile regression, we show that there is a statistically significant link between Bitcoin price movements and changes in nominal exchange rates. In normal market conditions, an increase in the price of Bitcoin can be associated with an appreciation of the currencies from our sample, while during the COVID-19 pandemic, the relationship inversed. In addition, we find heterogeneities in this relationship, depending on the level of change in the nominal exchange rate. The results emphasize the relevance of Bitcoin price movements to the conduct of monetary policy through the exchange rate channel and that investors in cryptocurrencies and various financial assets denominated in the currencies from our sample can benefit from diversification by including both types of assets in their portfolios.

Suggested Citation

  • Bogdan Andrei Dumitrescu & Carmen Obreja & Ionel Leonida & Dănuț Georgian Mihai & Ludovic Cosmin Trifu, 2023. "The Link between Bitcoin Price Changes and the Exchange Rates in European Countries with Non-Euro Currencies," JRFM, MDPI, vol. 16(4), pages 1-12, April.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:4:p:232-:d:1117635
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    References listed on IDEAS

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