Title: Cryptocurrencies and their Implications for Central Bank Policies in Developing Economies
Authors: Andrew E.O Erhijakpor, PhD
Volume: 9
Issue: 2
Pages: 1-8
Publication Date: 2025/02/28
Abstract:
The study explores the effect of cryptocurrencies (Bitcoin market capitalization (BMCAP), total cryptocurrency market capitalization (TMCAP), and investment in cryptocurrencies (ICRYTO)) on exchange rate fluctuations in developing economies. The population of interest is developing economies, with a specific focus on Nigeria. Annual data spanning from 2014 to 2023, was used to capture the evolution of cryptocurrencies and their potential effects on exchange rate fluctuation sought from Statista, CoinMarketCap, CryptoCompare, financial databases and central bank of Nigeria Statistical Bulletin. The Causal-comparative research design was used to examine variations in cryptocurrency and their influence on exchange rate movements in developing economies. Quantitative approach, using econometric modeling techniques was used to examine the effects of cryptocurrency-related variables on exchange rates.From the results, BMCAP show positive but not significant effect, TMCAP has positive and significant effect while ICRYTO show negative and menial effect. The study concludes that TMCAP is the only statistically significant variable influencing exchange rate in the model. The others (BMCAP & ICRYTO) have minimal direct influence on the exchange rate in this model. The study recommends that policymakers and analysts should monitor changes in total cryptocurrency market capitalization when studying exchange rate dynamics.