Comparative Study of the Relationship among Returns on Bitcoin, Stock Market and Exchange Rate

Background: Exchange rate and stock market have essential roles in economic development (Nieh and Lee, 2001), implementation of monetary and fiscal policies (Wong, 2017), and the development of the financial system (Afshan et al., 2018). Also including the bitcoin markets, these variables have now been the focus of empirical research. According to the literature, developments in one of the markets can rapidly spread to the other one (Andriansyah and Messinis, 2019). Objective: This study looked at the relationship between returns on bitcoin trading, stock market returns, and exchange rate returns. Method: Ten oil-importing nations—Botswana, Hong Kong, Kenya, Morocco, Rwanda, Sweden, Switzerland, Tanzania, Turkey, and Uganda—are the subject of this study, which spans 10 years (2014–2023).. Weekly data was gathered on variables such as bitcoin values, currency movements, and stock returns. In the study, Markov-switching regression was used. Results: The results imply that, rather than being constant, the impact of bitcoin on stock market fluctuations in economies that import oil may be situational or market-specific. Currency exchange rates may be impacted by shifts in stock market indices and bitcoin commitments, as these factors might lower customers' purchasing power and increase the demand for foreign currency. Furthermore, it is discovered that this effect endures irrespective of the economic conditions. Conclusion: It's not always the case, but there are situations and market settings in which the impact of Bitcoin on stock market swings is likely to be greater in oil-importing economies. Stock market indices and bitcoin commitments affect currency exchange rates because they dilute the purchasing power of domestic consumers and may increase demand for foreign money. No matter where the economy is in any particular era, the influence is still there. These findings are consistent with those of prior investigations, including those conducted by Miriam, Edgar, and Alejandro (2019). Unique Contribution: The current work, which addresses a gap in the existing literature, employs the Markov-switching regression. It aims to provide global firms, investors, and politicians with sound empirical findings. Key Recommendations: In response to inflationary pressures, the government may decide to tighten monetary policy and raise interest rates in order to ensure future economic stability. The government may choose to enact monetary policy measures if it is sincere about stabilizing the value of the currency.Investors should place their money in bitcoin since it is a cryptocurrency that is independent of national fortunes, especially in light of the instability and changes in oil prices