Is Bitcoin an Alternative Investment Asset? An Econometric Investigation of China and the USA

Abstract

This paper evaluated Bitcoin financial and economic behaviour by using the econometric model on Bitcoin rate of returns compared to the alternatives assets like precious metals, stock market, and exchange rate risk. The study employed the various Quantile Regression models to observe the hedging ability of Bitcoin under bearish and bullish scenarios. The daily data of China and the USA have been collected, from July 18, 2010, to August 31, 2021. The result indicates that under different market phenomena, Bitcoin holds hedge and safe-haven asset properties against precious metals such as gold, silver, and platinum. Bitcoin can be used as an alternative to money during the currency devaluation against the US Dollar since it holds a hedge and safe- haven properties against S&P 500 Index and SSEC Index. The study elaborates the several implications for investors portfolios. Finally, the study draws the attention of policymakers towards the legalisation of Bitcoin as a currency alternative considering its efficient performance under different economic conditions, supported by detailed theoretical and empirical analyses.