Surabaya — Bitcoin price movements have a stronger influence on Indonesia’s Composite Stock Price Index (IHSG) than the Federal Reserve’s interest rate policy, according to a new study by Muhammad Dzakwan Rafif and Putra Perdana from Universitas Pembangunan Nasional “Veteran” Jawa Timur. Published in 2026 in the International Journal of Scientific Multidisciplinary Research (IJSMR), the study highlights the growing role of digital assets in shaping Indonesia’s stock market.
Over the past decade, Bitcoin has emerged as one of the most attractive alternative investment assets, offering high returns but also high risks. This shift has changed investor behavior, as many now balance their portfolios between traditional stocks and digital assets.
The researchers analyzed monthly data from January 2010 to December 2025, collected from the Federal Reserve, TradingView, and Investing.com. Using the Vector Error Correction Model (VECM), they examined both short-term and long-term relationships between Bitcoin prices, Fed interest rates, and the IHSG.
The findings reveal that Bitcoin has a significant negative long-term impact on the IHSG. This means that when Bitcoin prices rise, the Indonesian stock market tends to weaken as investors shift their capital into cryptocurrency markets.
According to Muhammad Dzakwan Rafif and Putra Perdana from Universitas Pembangunan Nasional “Veteran” Jawa Timur, Bitcoin’s high return potential often attracts investors seeking faster gains, making it a major competitor to domestic equities.
Meanwhile, the Fed’s interest rate policy also showed a negative relationship with IHSG, but its impact was statistically insignificant in both short-term and long-term analysis. This suggests that while U.S. monetary policy still matters, its direct influence on Indonesia’s market is weaker than Bitcoin’s.
The study also discovered an indirect transmission mechanism: changes in Fed interest rates affect Bitcoin, and Bitcoin then influences the IHSG. This highlights the evolving role of cryptocurrency as a bridge between global monetary policy and domestic financial markets.
A notable finding from the FEVD analysis shows Bitcoin’s contribution to IHSG variance rising steadily from 0.84 percent to 18.51 percent over 24 periods, while the Fed contributed only around 1.30 percent. This confirms Bitcoin’s increasing dominance as an external factor shaping Indonesia’s market movements.
The study carries important implications for investors. Bitcoin can no longer be treated as separate from the stock market. Monitoring cryptocurrency trends is now crucial for understanding market sentiment and making strategic portfolio decisions.
For policymakers, the findings underline the importance of strengthening Indonesia’s domestic investment ecosystem to maintain the attractiveness of local stocks amid growing global interest in digital assets.
As financial markets become increasingly interconnected, this research shows that the future of investing will depend not only on central bank decisions but also on the fast-changing world of digital assets.
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