http://www.iaeme.com/IJM/index.asp 1703 editor@iaeme.com International Journal of Management Volume 11, Issue 10, October 2020, pp. 1703-1712. Article ID: IJM_11_10_156 Available online at http://www.iaeme.com/ijm/issues.asp?JType=IJM&VType=11&IType=10 Journal Impact Factor (2020): 10.1471 (Calculated by GISI) www.jifactor.com ISSN Print: 0976-6502 and ISSN Online: 0976-6510 DOI: 10.34218/IJM.11.10.2020.156 © IAEME Publication Scopus Indexed BITCOIN PRICE VOLATILITY AND HEDGING CAPACITY Naga Mani Nistala, Mitra Saeedi * and Muhammad Umar Islam Asia Pacific University of Technology and Innovation, Kuala Lumpur, Malaysia *Corresponding Author ABSTRACT Bitcoin is an encrypted, peer-to-peer network with a decentralized mechanism to promote digital exchange. It can behave like fiat money, commodity, or even an asset. Arguably, its intense market responses do offer shocks to investors encouraging the researchers to investigate Bitcoin's price behavior. The purpose of this paper is to summarize the factors contributing to Bitcoin volatility as well as the hedging capacity of Bitcoin. In this systematic literature review (SLR), relevant articles have been examined from Bitcoin's origination to-date. This review intends to build awareness of factors that trigger Bitcoin volatility and how effectively Bitcoin can be used for the process of diversification. Several studies have evidenced that traditional financial markets volatilities and investor sentiment play a decisive role in igniting Bitcoin volatilities. Some scholars argue the inception of Bitcoin futures has contributed to Bitcoin volatility during the Bitcoin crash period of 2017 to 2018. Lastly, a large stream of research proves the hedging and diversification capacity of Bitcoin. The findings are mostly consistent with correlating Bitcoin against different assets in different periods. Keywords: Bitcoin, Cryptocurrency, Volatility, Hedging, Diversification. Cite this Article: Naga Mani Nistala, Mitra Saeedi and Muhammad Umar Islam, Bitcoin Price Volatility and Hedging Capacity, International Journal of Management, 11 (10), 2020, pp. 1703-1712. http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=11&IType=10 1. INTRODUCTION The global financial crisis of 2008 and the European debt crisis of 2010-2013 fueled economic unrest and hampered trust in the central bank’s authority. It paved the path for the emergence of new and alternative investment avenues. Furthermore, technological growth, cost-saving pressures, and demands for product innovation have been the catalysts for the introduction of new products and solutions in the financial system. The advent of virtual currencies seems to reflect existing developments in the financial system. Their rising success confirms the correct response to emerging challenges [1].