Bitcoin and Gold Prices: A Fledging Long-Term Relationship

Abstract

This study applies threshold regression model in a bivariate framework to explore the nonlinear long-term relationship among Bitcoin and gold prices over the period 2010-2018. Results are threefold: first, we show that gold is a significant predictor of Bitcoin prices. Second, we find evidence of a non-linear relationship between Bitcoin and gold prices characterized rather by a two-regime relationship with a structural break occurring in October 2017. Third, before the break, there is significant, negative but weak causality indicating that Bitcoin is a speculative asset. After the break, the relationship becomes significantly positive revealing diversifier and hedge properties of Bitcoin.