Factors Influencing Digital Asset Market

Abstract

Research on the factors influencing the digital asset market mainly comprises two objectives: 1) to examine factors that determine the digital asset market by focusing on six dimensions such as politics, economy, society, technology, environment, and law, 2) to study the relationship between economic variables and the value of the digital asset market. This study applies both qualitative and quantitative analysis. Qualitative analysis using the PESTEL model is used to study factors determining the digital asset market, while quantitative analysis using the Granger Causality test is employed to examine the relationship between economic factors and digital asset market value. This study covers the period from 2017 to 2022. The results suggest that political, economic, social, technological, environmental, and law factors are related to the acceptance of cryptocurrencies. Furthermore, some macroeconomic variables, such as average world headline CPI and world food price have a significant effect on digital asset market capitalization and the market capitalization of Bitcoin. In addition, the market capitalization of major digital assets and Bitcoin also significantly impact the stock markets, particularly on the Dow Jones Industrial Average, S&P 500, and Nasdaq. Therefore, policymakers can mitigate potential contagion risk by implementing robust monitoring and surveillance mechanisms.