The Causality Relationship Between Bitcoin and Dollar, Gold and BIST100 Index

Abstract

This study investigates the causal relationships between Bitcoin and the US Dollar (USD), Gold, and BIST100 Index as alternative investment instruments. Employing Hong’s variance causality test, the research explores spillover effects in mean and volatility. Using daily data from September 17, 2014, to October 13, 2023, the study reveals a one-way average causality from Bitcoin to BIST100 and the USD. Variance test results show a two-way volatility spillover between Bitcoin and USD, Gold, and BIST100. Hacker-Hatemi-J symmetric causality test detects a one-way causality from Bitcoin to the USD, while Hatemi-J asymmetric test reveals a unidirectional causality from positive Bitcoin shocks to negative shocks of BIST100 and Gold, and bidirectional causality with USD's negative shocks. Additionally, a bidirectional causality exists from Bitcoin's negative shocks to Gold's positive shocks and a unidirectional causality to USD's negative shocks. Recognizing Bitcoin as a financial asset sheds light on its interaction with traditional markets, aiding investors in refining strategies. In summary, this study enhances comprehension of cryptocurrency's role by emphasizing the causal link between Bitcoin and the USD.