A Study on the Relationship between Indonesian Rupiah Exchange Rate and Cryptocurrencies (2018-2022)

Abstract

In the evolving landscape of the digital economy, the concept of cryptocurrency has become increasingly ubiquitous. Over time, these digital assets have assumed roles that were once the exclusive domain of traditional currencies, not just this but expected to have a negative impact on them. This study aims to investigate the relationship between the Indonesian Rupiah (IDR) exchange rate and cryptocurrencies and to measure and evaluate the impact of cryptocurrencies on the Indonesian Rupiah exchange rate. Data for the analysis were collected monthly from 1 January 2018 to 31 December 2022. The dynamic linear regression model was used to examine the relationships in the research model using the statistical analysis software EViews 10. The findings of the research suggested that in the short term, both CMC and XRP had a significant impact on the Indonesian Rupiah (IDR). More specifically, an increase in the price of XRP results in the depreciation of the IDR against the US dollar, and an increase in the price of CMC led to the depreciation of the IDR as well. In the other hand, ITR, R and TREG as control variables (economic indicators) were found that they had a significant impact on the Indonesian Rupiah (IDR) in the long run. We recommend that Bank Indonesia (Central Bank of Indonesia) regulate cryptocurrencies and consider issuing its digital Rupiah. Our research contributes to the literature on how cryptocurrencies influence the Indonesian Rupiah exchange rate.