How Does Bitcoin React to Economic Uncertainty Volatility Shocks?
|Autor:||Bc. Jakub Láža|
|Rok:||2022 - letní|
|Vedoucí:|| Mgr. Jan Šíla MSc.
|Typ práce:|| Bakalářská
|Abstrakt:||This thesis explores the volatility connectedness between Bitcoin and economic
uncertainty. We aim to model reactions of Bitcoin’s volatility to shocks in
economic uncertainty to uncover whether Bitcoin can provide protection from
an economic unrest. The uncertainty is assessed from the media-based Economic Policy Uncertainty (EPU) Index, the market-based VIX Index and the
public-based Economic Queries Related Uncertainty (EURQ) Index. Using the
dynamic network connectedness measure, it is possible to track the time evolution of directional volatility spillovers in each time point of our dataset spanning
from April 2015 to February 2022. Our results show several significant periods
when Bitcoin receives volatility spillovers from economic uncertainty. However,
in most cases, the eect is weak. One exception is the COVID-19 crisis, during
which Bitcoin forms a substantial volatility connectedness with the VIX Index.
We also show that before 2020, Bitcoin reacts to several shocks driven by the
EPU Index. Further, amid inflation fears at the end of 2021, the volatility
spillovers mainly originate from the EURQ Index