The Impact of Quantitative Easing on Cryptocurrency


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Authors

  • Cong Gu School of Economics and Management, University of Chinese Academy of Sciences
  • Benfu Lv School of Economics and Management, University of Chinese Academy of Sciences
  • Ying Liu School of Economics and Management, University of Chinese Academy of Sciences
  • Geng Peng School of Economics and Management, University of Chinese Academy of Sciences

Abstract

On March 23, 2020, the Federal Reserve Board started the ‘unlimited quantitative easing' to boost economy. After the announcement, an obvious boom in the cryptocurrency markets is observed. This research adopted an event analysis method, by analyzing the cumulative abnormal returns before and after the statement, the study confirmed that the QE announcement has a significant impact on the two most popular cryptocurrencies, Bitcoin and Ethereum. There could be several possible explanations: cryptocurrencies can be used as an inflation hedge, a ‘safe haven' for other financial asset classes, and a substitute way of transaction. While gold is also known as an inflation hedge and a safe haven, the abnormal returns of the two biggest cryptocurrencies over gold indicate that the third reason, cryptocurrencies are being favored as an alternative option for transactions, played an important role in the boom of Bitcoin and Ethereum, and the boom of them might lead to the frenzied market of other cryptocurrencies.Keywords: Bitcoin, Cryptocurrency, Quantitative easing, event analysisJEL Classifications: G15, C10, E52DOI: https://doi.org/10.32479/ijefi.11532

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Author Biographies

Cong Gu, School of Economics and Management, University of Chinese Academy of Sciences

PhD Candidate, School of Economics and Management, University of Chinese Academy of Sciences 

Benfu Lv, School of Economics and Management, University of Chinese Academy of Sciences

Professor, School of Economics and Management, University of Chinese Academy of Sciences

Ying Liu, School of Economics and Management, University of Chinese Academy of Sciences

Professor, School of Economics and Management, University of Chinese Academy of Sciences

Geng Peng, School of Economics and Management, University of Chinese Academy of Sciences

Professor, School of Economics and Management, University of Chinese Academy of Sciences

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Published

2021-07-12

How to Cite

Gu, C., Lv, B., Liu, Y., & Peng, G. (2021). The Impact of Quantitative Easing on Cryptocurrency. International Journal of Economics and Financial Issues, 11(4), 27–34. Retrieved from https://econjournals.com/index.php/ijefi/article/view/11532

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