The Influence of Virtual Currencies on Conventional Currencies A Case Study on the Bitcoin and the Price of Gold

Abstract

This research investigates the growing impact of virtual currencies, with a specific focus on how Bitcoin, a leading digital currency, influences gold prices. It delves into the evolving role of Bitcoin in the traditional financial sphere, examining its effect on gold, a classical asset and a benchmark of economic stability. Through this study, we aim to understand the nuances of this unique interaction and its implications for the broader financial landscape. This paper presents an in-depth case study that examines the correlations and potential causal relationships between the volatility in virtual currency markets and gold price fluctuations, a traditional indicator of economic stability and a renowned safe-haven asset, with a particular focus on the period encompassing the COVID-19 pandemic. Using a range of econometric methods, including time-series analysis and the Autoregressive Integrated Moving Average (ARIMA) model, this research analyzes historical price data from the past decade, with a special emphasis on the impact of the COVID-19 pandemic alongside other key geopolitical events and macroeconomic factors, to elucidate the interplay between these distinct asset classes.