Asymmetric dynamics between cryptocurrency uncertainty and the oil and gold markets: evidence from Granger causality in quantiles

ABSTRACT

This research examines the causal relationships between cryptocurrency uncertainty, the price of crude oil, and the price of gold using weekly data from 30 December 2013, to 21 February 2021, applying Granger-causality analysis on each quantile. Under this approach, we are able to distinguish between median and tail relationships for conditional quantiles. We find a bidirectional causal relationship between cryptocurrency uncertainty and crude oil prices, implying that crude oil price volatility is one source of cryptocurrency uncertainty, whereas a causal relationship from cryptocurrency uncertainty or crude oil prices to gold suggests that gold hedges cryptocurrency uncertainty and crude oil price shocks. Our research calls on governments to maintain cryptocurrency market stability to reduce market volatility in crude oil prices. Investors and fund managers can consider adding gold assets to portfolios that contain cryptocurrencies or crude oil in order to hedge against the risks of cryptocurrency uncertainty and crude oil price volatility.

KEYWORDS:

• Cryptocurrency uncertainty
• cryptocurrency
• crude oil price
• gold price
• Granger-causality

JEL CLASSIFICATION:

• C22
• E44
• G12
• G32
• Q43

Acknowledgements

The authors are grateful to the Editor and the anonymous referees for their highly constructive comments and suggestions, which substantially improved the article.

Disclosure statement

The authors declare that we have no relevant or material financial interests that relate to the research described in this paper.