What is the impact of uncertainty related to geopolitical risk on Bitcoin compared to the stock market since 2010 ?

Details

Supervisors

Iania, Leonardo

Faculty

Louvain School of Management

Degree label

Master [120] : ingénieur de gestion, à finalité spécialisée

Abstract

This paper examines the impact of geopolitical uncertainty on Bitcoin and compares its response to that of the traditional stock market, as represented by the S&P 500 index. The study aims to assess whether Bitcoin can offer diversification benefits and potentially serve as a safe-haven asset during periods of heightened geopolitical uncertainty. Using daily data covering the period from 2010 to 2026, the analysis combines several econometric methodologies, including EGARCH, VAR, Granger causality and DCC-GARCH models, to examine the relationship between geopolitical risk, Bitcoin and stock market volatility, whilst studying certain selected geopolitical crises in greater detail. The empirical analysis provides a comprehensive comparison of the reactions of Bitcoin and the S&P 500 index to geopolitical risk, whilst taking into account general market conditions and volatility dynamics. The results suggest that the relationship between geopolitical risk and financial markets is complex and cannot be fully captured by a direct relationship between the GPR index and asset returns or volatility. The findings also shed light on Bitcoin’s potential role as a diversification and hedging instrument in times of uncertainty, whilst raising the question of whether these characteristics are sufficient to classify it as a safe-haven asset. Overall, this study contributes to the ongoing debate on the role of Bitcoin in financial markets by comparing its behaviour to that of traditional equities over a long period characterised by geopolitical and financial uncertainty.