COINTEGRATION ANALYSIS OF THE RELATIONSHIP BETWEEN INFLATION AND THE CRYPTOCURRENCY BITCOIN
DOI:
https://doi.org/10.31891/mdes/2023-10-49Keywords:
сryptocurrency, inflation, cointegration, macroeconomic indicators, monetary policy, economic integrationAbstract
An empirical study of the potential role of cryptocurrency as an inflation hedge is becoming increasingly relevant amid recent global economic uncertainty and inflationary pressures. This study examines the long-run relationship between Bitcoin prices and inflation through cointegration analysis using monthly data from January 2015 to June 2023. Using the Engle-Granger and Johansen cointegration tests in a rolling window framework, we assess the stability and evolution of this relationship over time.
The results show a complex and time-varying relationship between the cryptocurrency Bitcoin and inflation. The Johansen test found cointegration in 25% of the moving intervals, while the Engle-Granger test found evidence in only 3.6% of the intervals, suggesting that any long-run equilibrium relationship is episodic rather than stable. A noticeable structural break is observed around 2021, coinciding with significant changes in both cryptocurrency markets and global economic conditions.
The findings call into question the narrative of Bitcoin as a reliable inflation hedge, indicating that its relationship with inflation is less stable than that of traditional hedging assets. The post-2021 period shows particularly high volatility in this relationship, despite wider institutional adoption and public attention. The results of the study suggest that while Bitcoin may offer inflation hedging properties over certain periods, these properties are not consistent enough to rely on for systematic inflation protection.
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