University of Twente Student Theses
Is Bitcoin a good asset for inflation hedging? : A comparison between Bitcoin returns and the inflation rates of the USA, the Euro-Zone, India, Kenya, and Venezuela
Wissmann, Patrick (2022) Is Bitcoin a good asset for inflation hedging? : A comparison between Bitcoin returns and the inflation rates of the USA, the Euro-Zone, India, Kenya, and Venezuela.
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| Abstract: | With rising inflation rates, cryptocurrencies are attracting more and more retail- and institutional investors. With Bitcoin being the first and largest cryptocurrency in terms of market capitalization many of these investors are asking themselves the same question: “Should I invest in Bitcoin?” The scarcity of Bitcoin, explained by its limited supply and its mining reward that is cut in half approximately every four years, makes many people believe that Bitcoin is an inflation hedge and Bitcoin is often stated as “digital gold”. This research will show if this the assumption of Bitcoin being an inflation hedge is true. Therefore, we test whether Bitcoin has inflation hedging capabilities in the economies USA, Euro-Zone, India, Kenya and Venezuela in a monthly time frame with a sample period from October 2014 till May 2022. These economies have been chosen on the basis of “The Chainalysis 2021 Geography of Cryptocurrency Report” by Chainalysis and the calculations of the “Global crypto adoption” by the company TripleA. According to Chainalysis and TripleA these economies are showing a high adoption rate and a great number of cryptocurrency wallets, which makes it interesting to investigate Bitcoin on inflation hedging in these economies. We do so by using the Fisher Coefficient and the extension by Fama and Schwert (1977). We find no statistical evidence that Bitcoin can be an inflation hedge in any of our economies and we have to reject the hypothesis that Bitcoin has inflation hedging capabilities within our sample period. Concluding Bitcoin is not a good asset for inflation hedging and investors should be careful when investing in Bitcoin, when their only goal is to hedge against inflation. |
| Item Type: | Essay (Bachelor) |
| Faculty: | BMS: Behavioural, Management and Social Sciences |
| Subject: | 83 economics, 85 business administration, organizational science |
| Programme: | International Business Administration BSc (50952) |
| Link to this item: | https://purl.utwente.nl/essays/92741 |
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