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Croatian Operational Research Review, Vol. 14 No. 1, 2023.

Original scientific paper

https://doi.org/10.17535/crorr.2023.0008

Behavioural antecedents of Bitcoin trading volume: A panel Granger causality test

Blanka Škrabić Perić orcid id orcid.org/0000-0002-7448-3821 ; Faculty of Economics, Business and Tourism, University of Split, Cvite Fiskovića 5, 21 000 Split, Croatia
Petar Sorić orcid id orcid.org/0000-0002-6773-264X ; Faculty of Economics and Business, University of Zagreb, Trg J. F. Kennedyja 6, 10000 Zagreb, Croatia
Ivana Jerković orcid id orcid.org/0000-0003-1180-5990 ; Faculty of Economics, Business and Tourism, University of Split, Cvite Fiskovića 5, 21 000 Split, Croatia

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Abstract

This paper aims to examine the behavioural determinants of Bitcoin trading volume within a cross-country framework of 14 world economies plus the Eurozone. We introduce a basic taxonomy of behavioural indicators, distinguishing between consumer confidence, economic policy uncertainty (EPU), and indicators of financial volatility. Our estimations reveal that the Bitcoin trading volume can be predicted more accurately by EPU than by any other class of indicators. Finally, we identify the COVID-19 shock as a catalyst for a psychologically-driven Bitcoin market and find evidence that Bitcoin was a macro hedging instrument in the pandemic. To obtain our results, we conducted a panel Granger causality test, employing the Least Squares Dummy Variables (LSDV) estimator. Contrary to previous research, we found that market fundamentals (industrial production and equity market volume) became significant drivers of Bitcoin trading during the pandemic. This conclusion was preserved when we used the LSDV corrected estimator, which is more suitable for panels with a smaller time dimension. Apart from the practical implications for traders, this paper provides researchers with detailed steps for applying Granger causality testing in panel data settings.

Keywords

Bitcoin; economic policy uncertainty; LSDV estimator; LSDV-corrected estimator; panel Granger causality test

Hrčak ID:

305787

URI

https://hrcak.srce.hr/305787

Publication date:

10.7.2023.

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