Bank Crisis Boosts Bitcoin Price

Round 1

Reviewer 1 Report

I find it an interesting approach to the role of Bitcoin in the financial system, although my opinion does not exactly coincide with that of the authors. But I think the article is methodologically well designed. However, I have a couple of thoughts that I wanted to pass on to the authors. Regarding the first, they speak very forcefully about the role played by bitcoin as a store of value during the banking crisis analysed. I think that this expression needs to be nuanced, as an asset with such high volatility as bitcoin cannot be a stable store of value. Secondly, the banking crisis analysed has served to initiate a bitcoin rally after the so-called crypto-winter. But, in my opinion, the continuation of the rally is due more to regulatory considerations, which are analysed by the authors; but also to behavioural finance issues, which are not mentioned by the authors. 

Author Response

Journal name: Journal of Risk and Financial Management 

Ref.: Ms. No. JRFMJ-2893911

Title: Bank Crisis Boosts Bitcoin Price

Dear Editor,

Dear Reviewer,

We are sincerely grateful for further useful comments and very useful suggestions and recommendations.

The paper has changed and improved following the suggestions made by the reviewers. However, and above all, we thank you very much for the opportunity you gave us to rework our manuscript following reviewer’s suggestions.

In the hope that our revisions meet with your approval, we thank you once again for your extremely helpful feedback and insightful review.

Yours sincerely,     

                                                                                                          The Authors

Reviewer #1 (in bold) & answers (in italics)

I find it an interesting approach to the role of Bitcoin in the financial system, although my opinion does not exactly coincide with that of the authors. But I think the article is methodologically well designed. However, I have a couple of thoughts that I wanted to pass on to the authors. Regarding the first, 

1)     They speak very forcefully about the role played by bitcoin as a store of value during the banking crisis analysed. I think that this expression needs to be nuanced, as an asset with such high volatility as Bitcoin cannot be a stable store of value. Working in progress.

We have updated the article to approach the role of BTC as a store of value with greater caution, although we have included numerous articles that support our argument (page 2 and 3, note 1).

2)     Secondly, the banking crisis analysed has served to initiate a bitcoin rally after the so-called crypto-winter. But, in my opinion, the continuation of the rally is due more to regulatory considerations, which are analysed by the authors; but also to behavioural finance issues, which are not mentioned by the authors.  

We have added note  which highlights the role of the crypto winter in the BTC price. Furthermore, we have refined the narrative behind our research hypothesis (note 3 on page 8 and page 7).

Reviewer 2 Report

1. The paper "Bank Crisis Boosts Bitcoin Price" has several shortcomings that need to be addressed before it can be considered for publication.

2. Abstract: The abstract needs significant revision to clearly state the aim of the study, the methodology employed, and the main results obtained. Currently, it lacks clarity and fails to provide a succinct summary of the research.

3. Introduction: The introduction is deficient in several aspects. It lacks essential components such as defining the purpose of the work, its significance, and a review of the current state of research in the field, including key publications and controversial hypotheses. It should be rewritten to provide a better context for the study and highlight its importance within the broader research landscape.

4. Literature Review: The literature review only provides a summary of various factors influencing the value and price of Bitcoin, rather than focusing on theoretical concepts relevant to the study's purpose. It should delve into the real perception of Bitcoin among investors and explore whether cryptocurrency can indeed be defined as a new asset class. The review should be more comprehensive and theoretically grounded.

5. Chapter 4: The inclusion of Chapter 4 is not justified, and its connection to the study's purpose is unclear. It lacks scientific value and should either be integrated into other sections or removed entirely.

6. Chapter 5: Chapter 5 starts with data and an approach description without prior explanation of the theoretical concepts discussed in earlier chapters. This sequence disrupts the logical flow of the paper and should be restructured.

7. Data Source: The statement that "the data were obtained from getsymbols() in Stata" raises confusion as Stata is typically used for statistical analysis rather than obtaining data. Clarification is needed regarding the data source and how it was accessed.

8. Theoretical Justification: The paper includes theoretically unjustified calculations and draws conclusions that do not align with the study's purpose. A thorough reassessment of the theoretical framework is necessary to ensure the conclusions are sound and relevant to the research question.

Overall, the paper requires substantial revisions to strengthen its theoretical foundation, improve clarity and coherence, and ensure that the conclusions are supported by the analysis. Without addressing these issues, it may not be suitable for publication.

Minor

Author Response

Journal name: Journal of Risk and Financial Management 

Ref.: Ms. No. JRFMJ-2893911

Title: Bank Crisis Boosts Bitcoin Price

Dear Editor,

Dear Reviewer,

We are sincerely grateful for further useful comments and very useful suggestions and recommendations.

The paper has changed and improved following the suggestions made by the reviewers. However, and above all, we thank you very much for the opportunity you gave us to rework our manuscript following reviewer’s suggestions.

In the hope that our revisions meet with your approval, we thank you once again for your extremely helpful feedback and insightful review.

Yours sincerely,     

                                                                                                          The Authors

Reviewer #2 (in bold) & answers (in italics)

1.     Abstract: The abstract needs significant revision to clearly state the aim of the study, the methodology employed, and the main results obtained. Currently, it lacks clarity and fails to provide a succinct summary of the research

The abstract has been rewritten to include the essential elements required. Now, the purpose of the study, the methodology, and the results are explicitly stated.

2.     Introduction: The introduction is deficient in several aspects. It lacks essential components such as defining the purpose of the work, its significance, and a review of the current state of research in the field, including key publications and controversial hypotheses. It should be rewritten to provide a better context for the study and highlight its importance within the broader research landscape.

In the introduction on page 4, the objectives of the research are clearly outlined. Additionally, references such as Yousaf & Goodell (2023), Vo & Le (2023), and Pandey et al. (2023) have been cited to demonstrate that the May 9th crisis had widespread impacts across different sectors. The paper also references Nathan et al. (2021) to discuss Bitcoin's potential as an investable asset, despite its unique risks. Furthermore, insights from Galati & Capalbo (2023) have been incorporated to explore the relationship between traditional finance and Bitcoin.

3.     Literature Review: The literature review only provides a summary of various factors influencing the value and price of Bitcoin, rather than focusing on theoretical concepts relevant to the study's purpose. It should delve into the real perception of Bitcoin among investors and explore whether cryptocurrency can indeed be defined as a new asset class. The review should be more comprehensive and theoretically grounded.

             The literature review has been completely rewritten, taking into account the suggestions from the reviewer. It has been revised to provide the reader with a clearer understanding of the perception of Bitcoin among investors, also considering the controversial hypotheses discussed

             above.

4.     Chapter 4: The inclusion of Chapter 4 is not justified, and its connection to the study's purpose is unclear. It lacks scientific value and should either be integrated into other sections or removed entirely. 
5.     Chapter 5: Chapter 5 starts with data and an approach description without prior explanation of the theoretical concepts discussed in earlier chapters. This sequence disrupts the logical flow of the paper and should be restructured.
6.     Theoretical Justification: The paper includes theoretically unjustified calculations and draws conclusions that do not align with the study's purpose. A thorough reassessment of the theoretical framework is necessary to ensure the conclusions are sound and relevant to the research question.

Answer 4,5,6: Chapter 4 has been completely restructured. In the new Chapter 4, "Data and Methodology," we initially discuss and present the results of tests on returns and squared returns to justify the use of GARCH models. Table 1 has been updated to include the results from the Augmented Dickey-Fuller test and the Phillips-Perron test, both of which assess stationarity. Additionally, the Ljung-Box test and the Lagrange Multiplier (Engle's ARCH test) have been incorporated. Figure 1 has been added to highlight the feature of volatility clustering in squared returns. Subsequently, the bank index is presented at the end of chapter 4, and a table listing all banks included in the bank index has been added (previously in the supplementary materials).

7. Data Source: The statement that "the data were obtained from get symbols () in Stata" raises confusion as Stata is typically used for statistical analysis rather than obtaining data. Clarification is needed regarding the data source and how it was accessed.

On page 8, we clarified the sources of the data.

Overall, the paper requires substantial revisions to strengthen its theoretical foundation,

improve clarity and coherence, and ensure that the conclusions are supported by the analysis.

Without addressing these issues, it may not be suitable for publication.

The conclusions have been completely revised and are now more consistent with the analysis results.

First, we briefly discuss the variations in volatility and price for the indices under review, and then we

examine how Bitcoin displays characteristics of both a speculative and a conservative asset.

Reviewer 3 Report

This paper attempts to link the price of Bitcoin and the banking crisis using data from the start of 2022 to the middle of 2023. While the topic is interesting, I think the authors should revise their paper to consider the following issues:
1. The tendency for investors to use alternative assets in times of financial crisis is well documented. The authors should review the literature on this issue more extensively. 

2. Gold is one of the traditional flights for safety assets, so is the US Treasuries. A more detailed analysis of the correlation between Bitcoin returns and the return for gold and US Treasuries. 

3. One could argue that institutional investor's involvement in Bitcoin legitimized the asset class. A more detailed analysis of the size of the Bitcoin market is controlled by institutional investors could bolster the claim. 

4. The data time frame is too short. The first real price bubble in Bitcoin happened in 2017. A lot of major economic events have happened since. the authors should extend their data and do a more comprehensive analysis on why the previous price bubble isn't linked to the bank crisis. 

No major issues.

Author Response

Journal name: Journal of Risk and Financial Management 

Ref.: Ms. No. JRFMJ-2893911

Title: Bank Crisis Boosts Bitcoin Price

Dear Editor,

Dear Reviewer,

We are sincerely grateful for further useful comments and very useful suggestions and recommendations.

The paper has changed and improved following the suggestions made by the reviewers. However, and above all, we thank you very much for the opportunity you gave us to rework our manuscript following reviewer’s suggestions.

In the hope that our revisions meet with your approval, we thank you once again for your extremely helpful feedback and insightful review.

Yours sincerely,     

                                                                                                          The Authors

Reviewer #3 (in bold) & answers (in italics)

This paper attempts to link the price of Bitcoin and the banking crisis using data from the start of 2022 to the middle of 2023. While the topic is interesting, I think the authors should revise their paper to consider the following issues: 

1. The tendency for investors to use alternative assets in times of financial crisis is well documented. The authors should review the literature on this issue more extensively. 

We have added numerous studies supporting the idea that BTC can be used as an alternative asset to traditional markets (Klein et al., 2018, Wang et al., 2019). Furthermore, we hypothesize that as volatility decreases, the function of BTC as a store of value may become more prominent. (page 6)

2. Gold is one of the traditional flights for safety assets, so is the US Treasuries. A more detailed analysis of the correlation between Bitcoin returns and the return for gold and US Treasuries. 

We find the idea of including Treasury in the analysis interesting for a future investigation of our hypothesis. We will include a comment on this in the conclusions (page 19).

3. One could argue that institutional investor's involvement in Bitcoin legitimized the asset class. A more detailed analysis of the size of the Bitcoin market is controlled by institutional investors could bolster the claim. 

On page 5, we suggest that the market size of BTC is still relatively small, which increases its volatility, deterring many investors. Furthermore, we argue, supported by several references, that the reduction in volatility will increasingly highlight its role as a store of value (Rudolf et al., 2021).

4. The data time frame is too short. The first real price bubble in Bitcoin happened in 2017. A lot of major economic events have happened since. the authors should extend their data and do a more comprehensive analysis on why the previous price bubble isn't linked to the bank crisis. 

The reasons behind the time frame selection have been clarified and included in the paper (page 8): The Bitcoin halving occurred on May 11, 2020. Consequently, the time span has been chosen to exclude the spurious volatility attributable to the previous halving period and market euphoria, which resulted in two peaks, respectively, in March and October 2021.

Reviewer 4 Report

“Bank Crisis Boosts Bitcoin Price” is an interesting and important article examining the performance of Bitcoin in the face of a banking system crisis. The study is well done overall but requires a couple minor edits in the introduction and a restructuring of the analysis section.

In the introduction:

The paper states “Cryptocurrencies represent a relatively recent new industry. Since its inception in 2009, Bitcoin (BTC)1 has witnessed numerous developments over its fourteen-year presence in the market.”   - Bitcoin is now 15 years old but if characterising crypto as an industry as opposed to Bitcoin as either an asset or currency, I’m not sure if “presence in the market” is the right way to frame it. There wasn’t what would traditionally be considered a market at it’s inception.

As the exact timeframes for Bitcoin are mining dependent, timeframes are estimates.  New coin issuance is estimated until 2140 and a halving occurs about once every 4 years.  The paper seems to imply these are exact fixed timeframes.

Multiple spot Bitcoin ETFs were approved on 10 January (not just one). 

In the Analysis Section:

While the substance of the Analysis section is good, the presentation could be improved.  The section is essentially a one-page paragraph.  This section should be reworked and set up based on key discussion points to make it more reader friendly.

Page 11 still has “See Figure ??.”

Overall, it is a great paper that engages well with the existing literature and I hope you find these minor suggestions helpful.

Author Response

Journal name: Journal of Risk and Financial Management 

Ref.: Ms. No. JRFMJ-2893911

Title: Bank Crisis Boosts Bitcoin Price

Dear Editor,

Dear Reviewer,

We are sincerely grateful for further useful comments and very useful suggestions and recommendations.

The paper has changed and improved following the suggestions made by the reviewers. However, and above all, we thank you very much for the opportunity you gave us to rework our manuscript following reviewer’s suggestions.

In the hope that our revisions meet with your approval, we thank you once again for your extremely helpful feedback and insightful review.

Yours sincerely,     

                                                                                                          The Authors

Reviewer #4 (in bold) & answers (in italics)

“Bank Crisis Boosts Bitcoin Price” is an interesting and important article examining the performance of Bitcoin in the face of a banking system crisis. The study is well done overall but requires a couple minor edits in the introduction and a restructuring of the analysis section.

In the introduction:

1. The paper states “Cryptocurrencies represent a relatively recent new industry. Since its inception in 2009, Bitcoin (BTC)1 has witnessed numerous developments over its fourteen-year presence in the market.”   - Bitcoin is now 15 years old but if characterising crypto as an industry as opposed to Bitcoin as either an asset or currency, I’m not sure if “presence in the market” is the right way to frame it. There wasn’t what would traditionally be considered a market at it’s inception.

Thank you for your comment. After reflection, we agree that defining market presence seemed inappropriate. We have proceeded to modify the sentence accordingly (page 4).

2. As the exact timeframes for Bitcoin are mining-dependent, timeframes are estimates.  New coin issuance is estimated until 2140 and a halving occurs about once every 4 years.  The paper seems to imply these are exact fixed timeframes. 

We have also revised this point by offering a more thorough and rigorous explanation (page 4).

3. Multiple spot Bitcoin ETFs were approved on 10 January (not just one).  

Thanks for the suggestion, it was simply a momentary lapse in this case (page 2).

In the Analysis Section:

1. While the substance of the Analysis section is good, the presentation could be improved.  The section is essentially a one-page paragraph.  This section should be reworked and set up based on key discussion points to make it more reader friendly. 

The Analysis section has been completely rewritten and expanded. Some of the changes include: additional charts to support our thesis and moving some of the tables previously found in the supplementary section to the main body. Furthermore, a description of how the GARCH models were estimated has been added (page 14).

2. Page 11 still has “See Figure ??.”

We apologize for the Figure ??; now all tables and figures have been properly referenced.

Round 2

Reviewer 2 Report

While the authors have indicated that changes have been made, I am unable to discern the specific modifications without track changes.

Minor

Author Response

Journal name: Journal of Risk and Financial Management 

Ref.: Ms. No. JRFMJ-2893911

Title: Bank Crisis Boosts Bitcoin Price

Dear Editor,

Dear Reviewer,

We are sincerely grateful for further useful comments and very useful suggestions and recommendations.

The paper has changed and improved following the suggestions made by the reviewers. However, and above all, we thank you very much for the opportunity you gave us to rework our manuscript following reviewer’s suggestions.

In the hope that our revisions meet with your approval, we thank you once again for your extremely helpful feedback and insightful review.

Yours sincerely,     

                                                                                                          The Authors

Reviewer #2 (in bold) & answers (in italics)

In the attached document, the changes associated with your comments and suggestions are in red, while those associated with the reviewers are in green.

1.     Abstract: The abstract needs significant revision to clearly state the aim of the study, the methodology employed, and the main results obtained. Currently, it lacks clarity and fails to provide a succinct summary of the research

The abstract has been rewritten to include the essential elements required. Now, the purpose of the study, the methodology, and the results are explicitly stated.

2.     Introduction: The introduction is deficient in several aspects. It lacks essential components such as defining the purpose of the work, its significance, and a review of the current state of research in the field, including key publications and controversial hypotheses. It should be rewritten to provide a better context for the study and highlight its importance within the broader research landscape.

In the introduction on page 4, the objectives of the research are clearly outlined. Additionally, references such as Yousaf & Goodell (2023), Vo & Le (2023), and Pandey et al. (2023) have been cited to demonstrate that the May 9th crisis had widespread impacts across different sectors. The paper also references Nathan et al. (2021) to discuss Bitcoin's potential as an investable asset, despite its unique risks. Furthermore, insights from Galati & Capalbo (2023) have been incorporated to explore the relationship between traditional finance and Bitcoin.

3.     Literature Review: The literature review only provides a summary of various factors influencing the value and price of Bitcoin, rather than focusing on theoretical concepts relevant to the study's purpose. It should delve into the real perception of Bitcoin among investors and explore whether cryptocurrency can indeed be defined as a new asset class. The review should be more comprehensive and theoretically grounded.

             The literature review has been completely rewritten, taking into account the suggestions from

             the reviewer. It has been revised to provide the reader with a clearer understanding of the

             perception of Bitcoin among investors, also considering the controversial hypotheses discussed

             above.

4.     Chapter 4: The inclusion of Chapter 4 is not justified, and its connection to the study's purpose is unclear. It lacks scientific value and should either be integrated into other sections or removed entirely. 
5.     Chapter 5: Chapter 5 starts with data and an approach description without prior explanation of the theoretical concepts discussed in earlier chapters. This sequence disrupts the logical flow of the paper and should be restructured.
6.     Theoretical Justification: The paper includes theoretically unjustified calculations and draws conclusions that do not align with the study's purpose. A thorough reassessment of the theoretical framework is necessary to ensure the conclusions are sound and relevant to the research question.

Answer 4,5,6: Chapter 4 has been completely restructured. In the new Chapter 4, "Data and Methodology," we initially discuss and present the results of tests on returns and squared returns to justify the use of GARCH models. Table 1 has been updated to include the results from the Augmented Dickey-Fuller test and the Phillips-Perron test, both of which assess stationarity. Additionally, the Ljung-Box test and the Lagrange Multiplier (Engle's ARCH test) have been incorporated. Figure 1 has been added to highlight the feature of volatility clustering in squared returns. Subsequently, the bank index is presented at the end of chapter 4, and a table listing all banks included in the bank index has been added (previously in the supplementary materials).

7. Data Source: The statement that "the data were obtained from get symbols () in Stata" raises confusion as Stata is typically used for statistical analysis rather than obtaining data. Clarification is needed regarding the data source and how it was accessed.

On page 8, we clarified the sources of the data.

Overall, the paper requires substantial revisions to strengthen its theoretical foundation,

improve clarity and coherence, and ensure that the conclusions are supported by the analysis.

Without addressing these issues, it may not be suitable for publication.

The conclusions have been completely revised and are now more consistent with the analysis results.

First, we briefly discuss the variations in volatility and price for the indices under review, and then we

examine how Bitcoin displays characteristics of both a speculative and a conservative asset.

Author Response File: Author Response.pdf

Reviewer 3 Report

The revision did address most of my concern.  

Minor stylistic issues remained. 

Author Response

Journal name: Journal of Risk and Financial Management 

Ref.: Ms. No. JRFMJ-2893911

Title: Bank Crisis Boosts Bitcoin Price

Dear Editor,

Dear Reviewer,

We are sincerely grateful for further useful comments and very useful suggestions and recommendations.

The paper has changed and improved following the suggestions made by the reviewers. However, and above all, we thank you very much for the opportunity you gave us to rework our manuscript following reviewer’s suggestions.

In the hope that our revisions meet with your approval, we thank you once again for your extremely helpful feedback and insightful review.

Yours sincerely,     

                                                                                                          The Authors

Reviewer #3

Thank you again for your availability and for the valuable suggestions you have provided. We have improved the English of our text. Furthermore, we have made some small changes aimed at enhancing the approach of our work, even in comparison to the existing literature and the conclusions. We hope that these latest modifications meet with your approval.