THE IMPACT OF FED ANNOUNCEMENTS ON BITCOIN PRICE AND ON THE BITCOIN FUTURES-SPOT SPREAD

This dissertation analyzes the impact of the FOMC announcements on the Bitcoin price and the spread between Bitcoin futures and spot prices. The analysis covers the period from January 2022 to April 2023. An event-driven analysis model is used to determine the association between these events and Bitcoin. Results indicate that the FOMC announcements, specifically during a contractionary monetary policy cycle, do not exhibit a statistically significant influence on the prices of Bitcoin. Moreover, these announcements do not appear to affect the spread between the futures and spot prices of Bitcoin. However, further study suggests the indirect impact of Fed monetary policy decisions on Bitcoin returns. Results suggest that events that lead the market to form expectations of the Fed increasing interest rates negatively affect Bitcoin returns, while events that lead investors to anticipate the Fed pausing the rate hike cycle have a positive impact on Bitcoin returns. In contrast, statistical analysis shows that Bitcoin Spread is only affected by events that cause the market to anticipate a Fed interest rate hike decision. Furthermore, evidence suggests that the price of Bitcoin demonstrates a positive reaction to events characterized by turmoil within the banking system. Conversely, it exhibits a negative response to the collapse of cryptocurrency companies.