Monetary Policy Uncertainty and Cryptocurrency Volatility

The paper analyzes the effect of monetary policy uncertainty on cryptocurrency volatility. We find that monetary policy uncertainty is an important driver of cryptocurrency volatility. However, contrary to the conventional wisdom that high uncertainty will lead to high volatility of financial assets, we find that monetary policy uncertainty negatively predicts cryptocurrency volatility. The effect is significant both in and out of sample. The predictability is more significant for longer horizons. Moreover, monetary policy uncertainty outperforms popular cryptocurrency volatility predictors