An Investigation of the Relationship Between Central Bank Unconventional Monetary Policy and Bitcoin Activity
Niamh Wylie & Martha O'Hagan‐Luff
Abstract
This article investigates whether the unconventional monetary policy (UMP) measures pursued by the Federal Reserve, the Bank of England, the Bank of Japan, and the European Central Bank since the Global Financial Crisis (GFC) are associated with an appetite for cryptocurrency. Previous studies, which almost exclusively focus on the relationship between cryptocurrency price effects and UMP, do not find evidence to support this relationship, but cryptocurrency prices have been found to be heavily manipulated. This research extends beyond price effects by examining underlying activity metrics for the most established cryptocurrency, bitcoin. It uses a novel dataset sourced from Twitter (rebranded X) to capture the reaction by social media users to UMP activity by the main central banks. Applying ARDL‐OLS modelling, we find evidence to support a significantly positive relationship between social media attention surrounding Quantitative Easing and Negative Interest Rate Policy and bitcoin‐related activity, and consistent with previous studies, no association with bitcoin returns. Our results may imply that perceived interference in the fiat monetary system is connected to the growing network effect of bitcoin, in part as a resistance movement against the power of institutional authority, reflecting an erosion of trust in central banks. Policy implications are discussed.
Evidence weight
Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40
| F · citation impact | 0.50 × 0.4 = 0.20 |
| M · momentum | 0.50 × 0.15 = 0.07 |
| V · venue signal | 0.50 × 0.05 = 0.03 |
| R · text relevance † | 0.50 × 0.4 = 0.20 |
† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.