The Nexus Between Cryptocurrency Returns Predictability And The Role Of The Environment: Analysis From European Countries

Abstract

The fast development of cryptocurrencies has turned the world financial markets upside down and created new opportunities and sources of investments and risk management. Nevertheless, the predictability of the cryptocurrency returns is an issue of vital concern to both the investors and policymakers. This paper examines the nexus between predictability in cryptocurrency returns and the environment with particular reference to the European nations. Based on a 2018 to 2024 panel dataset, this study used econometric models to evaluate the effects of environmental uncertainty, regulatory measures and macroeconomic variables on cryptocurrency returns. The result shows that the environmental factors such as uncertainty in policies, financial regulations linked to climate changes, and market sentiment have a major impact on the cryptocurrency returns. The study fulfills the objective of this research and extends the existing literature by incorporating the environmental factors into the models of cryptocurrency returns predictability, which will provide returns to investors, regulators, and other market participants in the European region.