On the safe-haven and hedging properties of Bitcoin: new evidence from COVID-19 pandemic

Abstract

Purpose

This study aims to investigate the safe-haven and hedging properties of Bitcoin against a wide variety of conventional assets before and during the coronavirus disease 2019 (COVID-19) pandemic.

Design/methodology/approach

This paper uses a smooth transition regression (STR) to jointly test the hedging properties of Bitcoin in normal conditions and Bitcoin's safe-haven properties in extreme stock market conditions.

Findings

Highlighting the results, the authors show that Bitcoin is able to provide safe-haven feature during the COVID-19 pandemic period while Bitcoin serves as a hedge tool in the pre-COVID-19 pandemic period. The findings also show that the prowess of the safe-haven/hedge nature is sensitive to the type of the asset market and the time horizon when switching from daily to weekly frequency data.

Originality/value

This is one of the first studies that conduct a combined analysis of the safe-haven and hedging capabilities of Bitcoin against several asset classes using an STR method. This study uses the longest sample period to yet, allowing researchers to examine Bitcoin's safe-haven and hedging features both before and after the COVID-19 pandemic.

Citation

Abdelmalek, W. and Benlagha, N. (2023), "On the safe-haven and hedging properties of Bitcoin: new evidence from COVID-19 pandemic", Journal of Risk Finance, Vol. 24 No. 2, pp. 145-168. https://doi.org/10.1108/JRF-06-2022-0153