Mechanism of information transmission from a spot rate market to crypto-asset markets

TL;DR

This paper uses SVAR-LiNGAM to uncover causal relationships between a spot exchange rate and major crypto-assets, revealing a specific causal order and positive effects, including Bitcoin influencing the EUR/USD rate with a delay.

Contribution

It introduces an application of SVAR-LiNGAM to identify causal order and effects between spot and crypto-asset markets, highlighting Bitcoin's influence on traditional currency rates.

Findings

Causal order: EUR/USD -> Bitcoin -> Ethereum -> Ripple

All instantaneous effects are strongly positive

Bitcoin influences EUR/USD with a one-day lag

Abstract

We applied the SVAR-LiNGAM to illustrate the causal relationships between the spot exchange rate, and three crypto-asset exchange rates, Bitcoin, Ethereum, and Ripple. It was notable that the causal order, the EUR_USD spot rate->Bitcoin->Ethereum->Ripple, was obtained by this approach. All the instantaneous effects were strongly positive. Moreover, it was notable that Bitcoin can influence the EUR_USD spot rate positively with a one-day time lag.