Geopolitical risks and cryptocurrency returns

Abstract

This study examines how global geopolitical risks, threats, and acts impact the daily returns of 10 major cryptocurrencies (BTC, ETH, USDT, XRP, BNB, USDC, BCH, DOGE, LTC, and ADA). The statistically significant results that are robust to the consideration of alternative model specifications and control variables suggest that there is strong evidence for (i) ETH, XRP, BNB and BCH responding negatively to the shocks of geopolitical risks, (ii) BTC, ETH, BNB, BCH, LTC and ADA responding negatively to the shocks of geopolitical threats, and (iii) all 10 cryptocurrencies not responding to the shocks of geopolitical acts. As these 10 cryptocurrencies do not respond positively to any of the three shocks in a robust and statistically significant way either, it is implied that none of them offer a reliable hedge against geopolitical risks.