Date of Award
Bachelor of Science
Bitcoin, and its contemporary substitute cryptocurrencies, are an exciting new evolution in our concept of money. However, there are currently factors holding back Bitcoin, the largest player in the cryptocurrency market, from a wider mainstream acceptance and adoption. The greatest force working against cryptocurrency’s ability to be an accepted method of exchange is its extreme price volatility which cannot be completely attributed to insufficient liquidity (Dyhrberg 2018). This research reexamines several GARCH models using a larger window with more observations than previous researchers, and determine that a GARCH(1,1) with an AR(6) term in the mean equation provide the best fit. After identifying the proper tool, a basket of explanatory macroeconomic variables was tested and further improved the fit. Notably, a strong relationship exists between currencies, commodities, and Bitcoin price variance furthering the common interpretation that Bitcoin exists somewhere in the ether of the two classes. Bitcoin also exhibited significant volatility responses to geopolitical events that imply a use by nefarious state actors. The objective of this project is to gain an understanding of the nature of cryptocurrency and its utilization in the macroeconomy.
Feola, Ben, "Bitcoin as a Global Currency: Exploring the Wild West of Cryptocurrency". Senior Theses, Trinity College, Hartford, CT 2019.
Trinity College Digital Repository, https://digitalrepository.trincoll.edu/theses/788