Can Bitcoin serve as an inflation hedge in the USA, Euro area, and Czech markets?
|Author:||Bc. Aleksandr Volkov|
|Year:||2023 - winter|
|Leaders:|| Mgr. Milan Ščasný PhD.
|Work type:|| Bachelors
|Awards and prizes:|
|Abstract:||Since the 1970s, economists have started studying the concept of inflation hedging
as a way to protect investments. With the recent high inflation rates, investors might
be interested if newly created assets such as cryptocurrencies can be effective against
inflation. This thesis paper aims to find out whether thelargest crypto asset Bitcoin can
be used as an inflation hedge. To answer this question, Fisher coefficient estimation
and hedging demand for the US, Euro Area, and the Czech Republic for the period
between November 2014 and October 2022 will be analyzed. In addition, the vector
autoregressive model (VAR)will be used for the US market in the same time frame.
The results showed overall positive Bitcoin returns but all three methods indicated no
or negative correlation between inflation rates in three regions and Bitcoin returns.
The thesis paper concludes that Bitcoin cannot be used as an inflation hedge as notall
requirements are met.