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Is There a Bitcoin–Macro Disconnect?

Cryptocurrencies’ market capitalization has grown quickly in recent times. This weblog put up analyzes the position of macro components as potential drivers of cryptocurrency costs. We take a high-frequency perspective, and we give attention to Bitcoin since its market capitalization dwarfs that of all different cryptocurrencies mixed. The important thing discovering is that, not like different asset courses, Bitcoin has not responded considerably to U.S. macro and financial coverage information. This disconnect is puzzling, as surprising adjustments in low cost charges ought to, in precept, have an effect on the value of Bitcoin.


Previous to its current decline, the market worth of cryptocurrencies reached a staggering $2.5 trillion, with Bitcoin crossing the $1 trillion mark. As well as, Bitcoin represents the lion’s share—between 50 p.c (these days) and 90 p.c (in 2016)—of the general capitalization of the digital foreign money market.

Market Capitalization of Bitcoin and Different Cryptocurrencies

Supply: Authors’ calculations.
Notes: The chart plots the market capitalizations of Bitcoin and twenty-two different cryptocurrencies (Aave, BinanceCoin, Cardano, ChainLink, Cosmos, CyrptocomCoin, Dogecoin, EOS, Ethereum, Iota, Litecoin, Monero, NEM, Polkadot, Solana, Stellar, Tether, Tron, Uniswap, USDCoin, WrappedBitcoin, and XRP). Market capitalization is calculated by multiplying the entire variety of cash in circulation by their worth.

Given their rising relevance, it’s pure to check the drivers of cryptocurrency costs. This weblog put up focuses on macroeconomic information and financial coverage surprises. We interpret cryptocurrencies as belongings whose present worth ought to depend upon the anticipated discounted worth of future values. This characterization implies that, from a macroeconomic viewpoint, developments that affect present and future rates of interest, whether or not instantly (information about financial coverage) or not directly (information about macroeconomic situations), ought to have an effect on the worth of cryptocurrencies.

We use a novel and complete intraday information set to determine the consequences of this information. By counting on high-frequency information in a brief sufficient window round a macro announcement, the info launch is (almost definitely) the one info systematically hitting the market. Therefore, by trying on the response of asset costs in that point window round varied bulletins, this weblog put up conducts the empirical finance model of a pure experiment.

For instance, the chart beneath exhibits the response of a number of U.S. asset costs round two varieties of information releases: information about the true economic system, such because the Bureau of Labor Statistics’ Employment State of affairs report (left panel), and information about financial coverage, particularly the FOMC assembly (proper panel). The June 2016 labor market report contained a lower-than-expected nonfarm payrolls determine, as in comparison with the Bloomberg consensus. Consequently, the greenback instantly depreciated towards the euro by about 1 p.c, inventory costs declined by about 0.5 p.c, and gold costs elevated by 2 p.c. Bitcoin, alternatively, moved sideways. On the June 2021 Fed assembly, the FOMC signaled that rates of interest wanted to rise sooner and quicker than market contributors had anticipated. Once more, the greenback, gold, and inventory costs instantly responded to the discharge, however Bitcoin didn’t reply in a scientific method.

Response of U.S. Asset Costs to Macroeconomic and Financial Coverage Information

Supply: Authors’ calculations.
Notes: Responses are normalized at zero on the time of the information launch. The horizontal axis shows the hours earlier than/after the discharge. EUR/USD refers back to the euro/greenback change fee, outlined as the quantity of U.S. {dollars} wanted to purchase one euro.

Evaluation and Outcomes

We systematically analyze the response of the EUR/USD change fee, gold, the S&P 500, and Bitcoin to 10 units of macro bulletins which have been singled out as necessary within the tutorial literature. In finding out the responses of chosen asset costs to macroeconomic and financial coverage information, we give attention to the 2000-2022 interval for all belongings besides Bitcoin, for which we selected a restricted (extra significant) pattern ranging from 2017. (For extra particulars on the evaluation, see our associated Employees Report on the subject.) We accumulate completely different items of macro information, masking the true economic system and inflation, in addition to financial coverage surprises. For financial coverage information, we take into account three distinct dimensions. The primary indicator, Goal, captures unanticipated adjustments within the present federal funds fee goal. The second indicator, Path, captures unanticipated adjustments sooner or later path of coverage. The third indicator, LSAP, captures unanticipated bulletins of future massive‐scale asset purchases.

Our priors are primarily based on a easy asset pricing mannequin for Bitcoin. We mannequin Bitcoin as an asset with no intrinsic worth whose present worth relies on the discounted worth of its future worth (for our beloved wonks, a “stochastic bubble”). We additionally accommodate the potential of the asset having no worth with a chance that relies upon positively on present and future rates of interest. Since financial coverage information impacts each present and future rates of interest, it ought to be related to Bitcoin valuation, whereas macroeconomic information has an oblique affect by the financial coverage response perform.

By counting on the regressions’ estimates, we are able to take a look at to what extent the response of an asset worth to a given macroeconomic announcement is systematic. The desk beneath reviews the connection between belongings (columns) and chosen macroeconomic and financial information (rows). The shading signifies whether or not the response is systematic, with darker colours equivalent to extra statistically important results. The image inside every cell signifies the signal of the correlation between asset returns and information. We discover that the EUR/USD change fee, gold, and the S&P 500 considerably react to most macro and financial information. In stark distinction, the response of Bitcoin is muted, and by no means important on the 1 p.c degree even after we give attention to simply financial coverage information.

Evaluating Asset Value Responses to Information Occasions


So… is macroeconomic information driving Bitcoin? On this put up, we conduct a scientific evaluation of the affect of macroeconomic and financial coverage information on Bitcoin’s worth. In distinction to change charges and shares, Bitcoin is basically unresponsive to macro information. Extra puzzling is the outcome that Bitcoin doesn’t additionally react to financial coverage surprises. At face worth, our research casts some doubts on the position of low cost charges in pricing Bitcoin. Given the brief pattern used within the evaluation, the jury remains to be out on this one, and extra proof is required to place the case to relaxation.

Photo: portrait of Gianluca Benigno

Gianluca Benigno is the top of Worldwide Research within the Federal Reserve Financial institution of New York’s Analysis and Statistics Group and a professor of economics on the College of Lausanne.

Carlo Rosa is an assistant professor on the College of Parma (Italy).

How one can cite this put up:
Gianluca Benigno and Carlo Rosa, “Is There a Bitcoin–Macro Disconnect?,” Federal Reserve Financial institution of New York Liberty Avenue Economics, February 8, 2023,

The views expressed on this put up are these of the creator(s) and don’t essentially replicate the place of the Federal Reserve Financial institution of New York or the Federal Reserve System. Any errors or omissions are the accountability of the creator(s).



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