Intraday reaction of cryptocurrencies to centralized monetary policies: an event study analysis on bitcoin

Abstract

The borderless and decentralised nature of Bitcoin, allied with its controversial increasing visibility and recognition in the financial markets, is putting pressure on policymakers to understand the extent to which Bitcoin behaves as the remaining assets. This is the first paper to employ high-frequency Bitcoin data to analyse its sensitivity to monetary policy decisions. The present analysis of its volatility and trading activity patterns reveal that Bitcoin does not significantly react to announcements on monetary decisions released by FED, ECB and BOE1, even when a change in policy occurs. These results suggest Bitcoin’s independence of centralised monetary authorities, which carries implications for investors, as they can benefit from diversification by investing in Bitcoin as an alternative asset class. These results are also valid for different exchanges and time periods, which reveals a certain level of market efficiency.