Investigating the Factors Affecting Bitcoin Fluctuations and the Inherent Financial Risks in Cryptocurrencies Using the GARCH Model (1,1)

Mirzaei, Kazem; Fotouh Abadi, Vahid; Nosratabadi, Jamshid

Investigating the Factors Affecting Bitcoin Fluctuations and the Inherent Financial Risks in Cryptocurrencies Using the GARCH Model (1,1)

Document Type : Original Article

Authors

¹ M.A. in Industrial Engineering, Amirkabir University

² Ph.D. in Telecommunications, Department of Technology, Supreme National Defense University

³ .A. in Information Technology Management, Payame Noor University, Tehran

Abstract

Bitcoin was introduced as a pioneering cryptocurrency when the global financial markets were in crisis. The decentralized financial system of Bitcoin needs to have monetary properties such as being a medium of exchange, account of value, and store of value to become a monetary unit for financial transactions. The biggest obstacle Bitcoin currently faces or such a performance is its price volatility. This study examines the limitations of the Bitcoin system for interpreting the scope of inherent financial and security risks. In this regard, a GARCH model (1,1) has been used to analyze bitcoin volatility with respect to macroeconomic variables in countries where bitcoin is traded most. This study explores how the Bitcoin system can inherently increase financial risks under policies of influential countries such as the United States

Keywords