Cryptocurrency as an Inflation Hedge for Real Estate Prices in Selected Asian Markets

Khor, Edmond Swee Bin (2025) Cryptocurrency as an Inflation Hedge for Real Estate Prices in Selected Asian Markets. Masters thesis, Tunku Abdul Rahman University of Management and Technology.

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Abstract

This study investigates the role of cryptocurrencies as an inflation hedge against residential real estate price inflation across ten selected Asian markets—India, Indonesia, Japan, Turkey, Malaysia, South Korea, Thailand, Israel, Saudi Arabia, and Hong Kong—from 2015Q4 to 2024Q4. Using a panel data econometric approach, the research analyzes the impact of cryptocurrency returns (Bitcoin, Ethereum, Ripple, and Dogecoin) and macroeconomic variables (interest rates and exchange rates) on real estate price dynamics. Panel OLS, Fixed Effects, and Random Effects models are estimated, with the Hausman test confirming the Fixed Effects model as the appropriate specification. Quarterly data from reputable financial databases are analyzed using multiple regression models, including Pooled OLS, Fixed Effects Model (FEM), and Random Effects Model (REM), with the Hausman test guiding model selection. The chosen FEM specification incorporates Least Squares Dummy Variable (LSDV) regression to isolate country-specific effects and structural heterogeneity. Due to the statistical insignificance of all cryptocurrencies in the fixed effects output during the crisis period and pre-crisis period, our study will focus solely on the post-crisis results to address the research question. The empirical findings indicate that Bitcoin returns have a statistically significant negative relationship with residential property prices in several countries, suggesting its potential as a partial inflation hedge. Ethereum, by contrast, does not demonstrate a significant impact across the panel. Furthermore, interest rates negatively influence property price inflation, consistent with traditional economic theory, while currency depreciation (weaker exchange rates) is associated with rising property prices, likely due to increased foreign capital inflows into local real estate markets. This study contributes to the limited cross-country empirical literature on digital assets and real estate by offering nuanced insights into their interrelationship under varying macroeconomic conditions. The findings suggest that while Bitcoin may offer hedging benefits in some contexts, its effectiveness is neither universal nor consistent. These results have implications for portfolio diversification, monetary policy, and financial regulation in inflation-sensitive sectors, emphasizing the need for localized assessment before integrating cryptocurrencies into real estate-related investment strategies. Keywords: Cryptocurrency, Inflation Hedge, Real Estate Prices, Bitcoin, Ethereum, Fixed Effects Model, Asian Markets