Bitcoin and gold prices: A fledging long-term relationship

Syed Zwick, Hélène and Syed, Sarfaraz Ali Shah (2019): Bitcoin and gold prices: A fledging long-term relationship.

Abstract

This study applies threshold regression model in a bivariate framework to explore the nonlinear and long-term relationship among daily Bitcoin and gold prices over the period April 2010 to December 2018. Our empirical results are threefold: first, we show that gold is a significant predictor of Bitcoin prices. Second, we find evidence of a non-linear relationship between Bitcoin and gold prices characterized rather by a two-regime relationship with a structural break occurring in October 2017. Third, we explain the existence at before the break, there is statistically significant, negative but weak causality indicating that Bitcoin is a speculative asset. However, after the break, the relationship becomes positive and strong revealing the diversifier and hedge properties of Bitcoin.

• Item Type: MPRA Paper
• Language: English
• Keywords: Bitcoin, gold prices, hedge, diversifier, structural break, threshold regression
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C24 - Truncated and Censored Models ; Switching Regression Models ; Threshold Regression Models; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E42 - Monetary Systems ; Standards ; Regimes ; Government and the Monetary System ; Payment Systems; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets

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