Abstract:
General background: The increasing integration of digital technologies has transformed global financial systems, with cryptocurrencies, especially Bitcoin, emerging as prominent financial instruments. Specific background: Amid widespread adoption by institutions and individuals, Bitcoin has garnered attention for its potential to influence traditional financial markets, particularly during periods of global uncertainty such as the COVID-19 pandemic. Knowledge gap: While much has been discussed about the theoretical influence of cryptocurrencies, empirical evidence on their actual impact on global financial indices remains inconclusive. Aims: This study investigates the effect of Bitcoin trading volume and the COVID-19 pandemic on a composite index comprising advanced (S&P 500), emerging (KLSE), and developing (DZ) market indices from July 2018 to December 2022. Results: Using a fixed-effects panel data model, the findings reveal that past market performance significantly predicts current performance, while Bitcoin trading volume and the pandemic show no statistically significant impact. Novelty: The study uniquely combines market classifications and utilizes a composite index to empirically isolate the influence of Bitcoin across diverse economies. Implications: These results suggest that, despite Bitcoin's rising prominence, its direct influence on global financial markets may be limited in the short term, underscoring the need for continued investigation as regulatory frameworks and adoption rates evo
Highlight :
Minimal Impact: Bitcoin trading volume and the COVID-19 pandemic had no statistically significant effect on global financial market indices (2018–2022).
Strong Market Correlation: Global financial indices showed strong interdependence, reflecting synchronized market behavior.
Future Outlook: Despite current findings, evolving crypto regulations and technologies may alter their financial market influence.
Keywords : Cryptocurrencies, Bitcoin, Trading Volume, COVID-19, Financial Indices
References
A. K. Ahmed, H. S. Shuair, and A. A. Shweish, "The Impact of Virtual Currencies on Crises in Financial Markets," Journal of Opinion in Economics and Administrative Studies, vol. 2, no. 2, pp. 131–137, 2020.
K. A. Q. Hussein, "Virtual Currencies and Their Rulings in Islamic Jurisprudence," Journal of Historical and Civilizational Studies, vol. 11, no. 43/1, 2020.
A. A. M. S. Al-Rawi and L. M. Tawfiq, "The Central Bank of Iraq in the Era of Digital Currencies: International Experiences with Virtual Scenarios," Journal of Pioneering Finance and Business, vol. 3, no. 3, Aug. 2022.
A. H. Shahin, "The Economic Characteristics of Bitcoin: An Analytical Study," Journal of Development and Economic Policies, vol. 22, no. 2, pp. 67–72, 2020.
O. Othmaniya and W. B. Qirat, "Cryptocurrencies: Bitcoin and Traditional Currencies," Journal of Economic Visions, pp. 69–82, 2021.
A. Y. Fahd, "The Impact of Encrypted and Legal Digital Currencies on the Effectiveness of International Monetary Policies," Journal of Pioneering Finance and Business, vol. 3, no. 3, Aug. 2022.
Y. Andrianto and Y. Diputra, "The Effect of Cryptocurrency on Investment Portfolio Effectiveness," Journal of Finance and Accounting, vol. 5, no. 6, pp. 229–238, 2017.
S. Corbet, B. Lucey, M. Peat, and S. Vigne, "Bitcoin Futures—What Use Are They?," Economics Letters, vol. 172, pp. 23–27, 2018.
S. Corbet, B. Lucey, A. Urquhart, and L. Yarovaya, "Cryptocurrency Liquidity and Volatility Interrelationships During the COVID-19 Pandemic," Finance Research Letters, vol. 45, 102137, 2022.
M. Ed and F. Group, Bitcoin and Beyond: Cryptocurrencies, Blockchains, and Global Governance, RIPE Series in Global Political Economy. Taylor & Francis Group, 2018.
D. El Mahdy, "The Economic Effect of Bitcoin Halving Events on the US Capital Market," Accounting and Finance Innovations, no. 65, 2021.
E. Mnif, A. Jarboui, and K. Mouakhar, "How the Cryptocurrency Market Has Performed During COVID-19? A Multifractal Analysis," Finance Research Letters, vol. 36, 101647, 2020.
F. Fang, Q. Xu, W. Hou, Y. Wang, and Z. Yan, "Cryptocurrency Trading: A Comprehensive Survey," Financial Innovation, vol. 8, no. 1, pp. 1–59, 2022.
F. Fang, Q. Xu, W. Hou, Y. Wang, and Z. Yan, "Cryptocurrency Trading: A Comprehensive Survey," Financial Innovation, vol. 8, Art. no. 13, 2022, doi: 10.1186/s40854-021-00321-6.
J. Barrdear and M. Kumhof, "The Macroeconomics of Central Bank-Issued Digital Currencies," Bank of England, Staff Working Paper, no. 605, p. 65, Jul. 2016.
J. S. Gans and H. Halaburda, "Some Economics of Private Digital Currency," National Bureau of Economic Research, University of Chicago Press, p. 272, 2015. [Online]. Available: [http://www.nber.org/chapters/c12992](http://www.nber.org/chapters/c12992)
T. Leirvik, "Cryptocurrency Returns and the Volatility of Liquidity," Finance Research Letters, vol. 44, 102031, 2022.
A. Lewis, "Blockchains and Financial Inclusion," Bits on Blocks, pp. 1–9, 2018. [Online]. Available: [https://bitsonblocks.net/2017/08/22/blockchains-and-financial-inclusion/amp/](https://bitsonblocks.net/2017/08/22/blockchains-and-financial-inclusion/amp/)
Committee on the Governance of Central Banks, "Issues in the Governance of Central Banks," Bank for International Settlements, May 2009.
L. B. Siegel, R. D. Arnott, and T. R. Aronson, "Ten Years After: Reflections on the Global Financial Crisis," 2019.
B. S. Tan and K. Y. Low, "Bitcoin—Its Economics for Financial Reporting," Australian Accounting Review, vol. 27, no. 2, pp. 220–227, 2017.
P. Wang, H. Zhang, C. Yang, and Y. Guo, "Time and Frequency Dynamics of Connectedness and Hedging Performance in Global Stock Markets: Bitcoin Versus Conventional Hedges," Research in International Business and Finance, vol. 58, 101479, 2021.
Q. Wang, Y. Wei, Y. Wang, and Y. Liu, "On the Safe-Haven Ability of Bitcoin, Gold, and Commodities for International Stock Markets: Evidence from Spillover Index Analysis," Discrete Dynamics in Nature and Society, 2022, Art. no. 1–16.
M. Wątorek, J. Kwapień, and S. Drożdż, "Cryptocurrencies Are Becoming Part of the World Global Financial Market," Entropy, vol. 25, no. 2, Art. no. 37, 2023.
Y. Andrianto and Y. Diputra, "The Effect of Cryptocurrency on Investment Portfolio Effectiveness," Journal of Finance and Accounting, vol. 5, no. 6, p. 237, 2017.