| dc.description.abstract | The objectives of this master’s thesis are to uncover the drivers behind the recent increasing
institutional demand for cryptocurrencies, and to examine whether Bitcoin is showing signs
of establishing itself as a safe haven asset. To answer the research questions posed, a mixed
methods research design was employed. The first research question led us to base our data
collection on interviews with experts and actors within the industry. The second research
question prompted quantitative analyses of the price performance of Bitcoin relative to the
performance of indices indicative of the global equity market and the principal flight-to-safety
asset, represented by the S&P 500, the MSCI World Index, and gold respectively. The
performance of the assets and indices were analysed over a seven-year period, and individual
sub-periods exhibiting signs of financial instability were determined using the VIX as an
indicator of market unrest. Pearson correlation analyses were then conducted to measure the
strength of the correlations, or lack thereof, between the returns of the assets and indices for
the defined sub-periods.
Our findings suggest that the drivers behind the increasing institutional demand for
cryptocurrencies are multifaceted and complex, and that they include factors both external and
internal to the cryptocurrency industry. Moreover, our findings indicate that the returns of
Bitcoin were uncorrelated with the returns of both indices and gold during the entire period
examined. During the periods of market unrest, Bitcoin was uncorrelated with the indices in
three individual periods. However, during the two most recent periods, 2020 as a whole and
during the initial months of the COVID-19 pandemic, Bitcoin had a moderate to strong
positive correlation with both indices.
On the basis of our findings, we conclude that the recent increasing institutional demand for
cryptocurrencies can be attributed to expansionary monetary and fiscal policy, an increased
focus on regulations, access to new markets through DeFi, and reduced volatility. We also
conclude that Bitcoin is not currently establishing itself as a safe haven asset.
Keywords: Bitcoin, cryptocurrencies, S&P 500, safe haven, macroeconomic policy | en_US |
