An exogenous variable is a variable in an economic model that is independent of the other variables in the model. As such, an exogenous variable is determined outside the model and impacts the model as an outside factor. In other words, it can affect the model but is not influenced by its internal dynamics.
Exogenous variables are considered fixed and independent, providing a way to explain the external influences that can affect the outcome of an economic model.
In the context of cryptocurrency markets, regulatory changes can be considered a major exogenous factor. Governments are constantly changing their stance on cryptocurrencies, leading to changes in regulations that can impact the market. For example, a change in crypto regulation in a major economy may negatively affect the crypto market.
Exogenous variables are external factors that influence economic models without being affected by their internal dynamics. It can be useful to consider exogenous variables in economic models to account for external factors, such as natural disasters and government policy. In the crypto market, examples of exogenous variables may include regulatory changes and technological advancements.