Cryptocurrency under Local Conflict: Evidence from Soaring Crude Oil Price

Jiayong Wu

doi:10.54097/hbem.v5i.5084

Authors

Jiayong Wu

DOI:

https://doi.org/10.54097/hbem.v5i.5084

Keywords:

Cryptocurrency, Russian Invasion, Crude oil.

Abstract

The ongoing Russian invasion of Ukraine is signaled as a black swan event with major effects to the world. The consequence of the corresponding sanctions sparked short-term and long-term damages not only to the countries directly involved but also to the global economy. Namely, the soaring crude oil price pushes countries to economic crisis. Additionally, the emergence of the cryptocurrency becomes a centerpiece in this conflict, as Ukraine opens cryptocurrency donations and Russia tries to avoid sanction with cryptocurrency. The relationship between the traditional Crude oil market and the relatively new global market of cryptocurrency has sparked this paper to research the effect of this local conflict. In this paper, Crude Oil yields, Bitcoin yields, and Ethereum yields from June 2021 to Sep 2022 are extracted. VAR model and ARMA-GARCHX model are selected to analyze the data. This study intends to examine the relationship between the oil yields and the major cryptocurrency yields, namely Bitcoin and Ethereum, with hopes to forecast the corresponding cryptocurrency yield followed by an oil yield shock.

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