Bitcoin Actually Declines Off of Political Uncertainty, Bombshell Study Finds

It might not be a good idea to purchase bitcoin as an insurance asset against this year’s nailbiting US presidential election.That is according to a new study that doubts bitcoin’s credential as a safe-haven asset against a mounting political uncertainty. Author Tobias Burggraf, a research assistant at WHU Otto Beisheim School of Management, found that the cryptocurrency’s price goes down whenever governmental risks are high.The report used two class of variables: One that concerned returns of bitcoin over a specific period of time, and the other that measured global political uncertainty (GPU) based on binaries 0 and 1. ‘One’ indicated high uncertainty when they fall within a period of six, three, or one month prior to a federal election. ‘Zero,’ on the other hand, showed low risks.“The correlation between Bitcoin and political uncertainty is negative for all three variables GPU6M, GPU3M, and GPU1M (−0.220, −0.276, and −0.152, respectively), which gives us a first indication of the directional relationship. When political uncertainty goes up, Bitcoin’s return goes down,” – wrote Mr. Burggraf.AnomaliesData that served as the basis to understand bitcoin’s return and GPU came from and the US Federal Election Commission, respectively.However, the study focused on prices and election data recorded between April 28, 2013, and October 31, 2019. Up until 2018, bitcoin’s volatility was much higher and was subject to a higher degree of price manipulation. It was only after April 2019 that the cryptocurrency started responding actively to global events (the US-China trade war is a prime example).

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