1MBA Department, College of Engineering, Guindy, Anna University, Chennai. India
2Assistant Professor (Sr. Gr), MBA Department, College of Engineering, Guindy, Anna University, Chennai. India.
The unprecedented move of demonetization by PM Modi to fulfill his vision for cash less and corruption free India has sparked new interest in Bitcoin due to the shortage of supply of cash and lack of liquidity. This study focuses to examine the relevance of abnormal return and volatility of Bitcoins and the most significant economic event of demonetization in India in 2016.An event study framework is adopted to study the tectonic impact of demonetization on Bitocoin exchanges. Focusing on daily Bitcoin prices from a leading Bitcoin exchange in India, Unocoin the subsequent effect on the Demonetization in India is analyzed. Using the parametric T-Test it is strongly evident that Bitcoin prices moves significantly upwards after the announcement of Demonetization.Abnormal return (AR) and cumulative abnormal return (CAR) from the constant mean return model of bitcoin prices are statistically significantly revealed.The finding also suggests that demonetization has increased the Bitcoin volatility. The increase in volatility and prices of bitcoin would be mainly being attributed to the fact that demonetization generates a cashless economy which attracted large investors in Bitcoin, which led to increase in the trading volume in Indian Bitcoin exchanges. This study provides insights to economist and experts in the field of crypto currencies to assess the impact of economic events like demonetization on crypto currencies. It also gives opportunity for the bitcoin investors to invest in crypto currencies by understanding the impact of economic events on crypto currencies.
Demonetization Announcement, Abnormal returns, Bitcoin, Constant-Mean return model, Event Study, Cumulative Abnormal Return, Volatility, Event Window, Crypto currency, Estimation Period
