Title: The asymmetric relationship between monetary policy and the institutional investors march into cryptocurrencies

Authors: Youcef Maouchi

Addresses: Department of Finance and Economics, College of Business and Economics, Qatar University, P.O. Box 2713, Doha, Qatar

Abstract: Using monthly data from April 2017 to June 2023, this study explores the factors associated with the rising institutional investments in cryptocurrencies, focusing on US monetary policy. We employ nonlinear autoregressive distributed lag (NARDL) and multiple threshold nonlinear ARDL (MT-NARDL) models to investigate the relationship between institutional crypto assets under management (AuM), the US Shadow Federal Funds Rate, Bitcoin price, S&P 500 index, and VIX. The results reveal a long-run asymmetrical relationship: institutional Crypto AuM increase with decreasing rates but remain stable during periods of monetary tightening. Moreover, institutional exposure to cryptocurrencies shows long-term growth, though short-term market volatility reduces exposure. Interestingly, Bitcoin's price seems to play a minimal role in these decisions. Our findings highlight the need for robust risk management by portfolio managers and suggest that policymakers consider the institutional capital flows into cryptocurrencies, given the potential implications for financial stability.

Keywords: cryptocurrencies; institutional investors; USA monetary policy; shadow federal funds rate; asymmetric effects; risk-taking behaviour; NARDL; nonlinear autoregressive distributed lag; MT-NARDL; multiple threshold nonlinear ARDL.

DOI: 10.1504/IJMEF.2025.148854

International Journal of Monetary Economics and Finance, 2025 Vol.18 No.5, pp.316 - 340

Received: 20 Aug 2024
Accepted: 27 May 2025
Published online: 29 Sep 2025 *

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