Bitcoin, Exchange Rates and Gold Relationship: An Econometric Approach

The purpose of this study is to explore both the size and direction of the relationship between the most known and widely used cryptocurrency, Bitcoin (BTC) and European Currency Euro (EUR), British Pound (GDP), and Gold (XAU) prices. To examine short-run and long-run relationships between Bitcoin and major exchange rates and gold prices, which all expressed in the US Dollars, we use daily data between July 2010 and December 2020, and apply the most commonly used ADF, PP, KPSS unit root tests, Johansen Co- integration test, and Granger Causality Analysis. Our time-series analysis shows no strong long-term relationship between Bitcoin and prime exchange rates, therefore, concludes that Bitcoin's value is determined in its own market conditions. On the other hand, we find a unidirectional (one-way) causality from British Pound to Bitcoin.