On the Determinants of Bitcoin Returns and Volatility: What We Get from Gets?
Adel Benhamed, Ahlem Selma Messai, Ghassen El Montasser
Abstract
Since Bitcoin has frequently witnessed price fluctuations and high volatility, the factors influencing its returns and volatility is an important research subject. To accomplish this goal, we applied the Gets reduction method which has a good reputation compared to other competing approaches in terms of the statistical apparatus available for a repeated search to determine the final set of determinants and the consideration of location shifts. We found that the reduced set of explanatory variables that affects Bitcoin returns is composed of Twitter-based economic uncertainty, gold return, the return of the Euro/USD exchange rate, the return of the US Nasdaq stock exchange index, market capitalization, and Bitcoin mining difficulty. In contrast, the volatility of Bitcoin is affected by only lagged terms of the ARCH effect and the volume of this cryptocurrency.