The impact of the Russia-Ukraine conflict on market volatility: stability of Islamic cryptocurrency

Fuad Hasyim; Sulistya Rusgianto; Hesti Eka Setianingsih; Nurul Fauziah; Arroyan Ramly

doi:10.21580/jiafr.2024.6.2.22363

Authors

Fuad Hasyim Universitas Islam Negeri Raden Mas Said Surakarta, Universitas Airlangga Surabaya, Indonesia
Sulistya Rusgianto Universitas Airlangga Surabaya, Indonesia
Hesti Eka Setianingsih Universitas Airlangga Surabaya, Indonesia
Nurul Fauziah Universitas Airlangga Surabaya, Indonesia
Arroyan Ramly İstanbul Üniversitesi, Turkey

DOI:

https://doi.org/10.21580/jiafr.2024.6.2.22363

Keywords:

cryptocurrency, volatility, geopolitics, bitcoin, tether gold

Abstract

Purpose - This research investigates how the Russia-Ukraine conflict affects the volatility of cryptocurrencies, with a specific focus on the comparative stability of Islamic gold-backed cryptocurrencies versus conventional cryptocurrencies, such as Bitcoin.

Method - Utilizing the GARCH model, this study examines the risk factors and volatility transmission among cryptocurrencies (Bitcoin and Tether-gold), traditional financial markets (gold and stock markets), and their interrelationships during the conflict period. The study employs the daily closing prices of Bitcoin, Tether-gold, gold, the S&P 500, and the Dow Jones Islamic Market Index from February 7, 2020, to November 30, 2023.

Result - Bitcoin experienced significant volatility during the conflict, while the Tether-gold remained more stable. Islamic gold-backed cryptocurrencies have proven to be more stable than conventional ones during geopolitical crises.

Implication - The findings offer valuable insights for investors seeking safe-haven assets during periods of economic uncertainty. Gold-backed cryptocurrencies present a more stable investment option compared to conventional cryptocurrencies, especially for investors adhering to Shariah principles.

Originality - This research highlights the stability of Islamic gold-backed cryptocurrencies during geopolitical events, contributing to the understanding of safe-haven assets and offering practical implications for portfolio diversification and risk management.

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