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

Abstract

PurposeThis 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/approachThis 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.FindingsHighlighting 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/valueThis 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.