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Bitcoin: A safe haven asset and a winner amid political and economic uncertainties in the US?

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  • Umar, Muhammad
  • Su, Chi-Wei
  • Rizvi, Syed Kumail Abbas
  • Shao, Xue-Feng

Abstract

Bitcoin is considered to be an exclusive marvel of the Fourth Industrial Revolution, and is one of the most sophisticated technological and financial products. It has long been a pivot point of attention for investors who are in pursuit of a safe haven asset. In this paper, we use the wavelet-based quantile-on-quantile method, and the quantile-based Granger causality method, in order to investigate the notion of Bitcoin in actually being a safe-haven asset, amid political and economic uncertainty in the US for the period between 2010:M06, and 2020:M10. Using the Partisan Conflict Index (PCI), and the Economic Policy Uncertainty Index (EPU) as proxies of uncertainties, we find that although Bitcoin effectively appears to be a safe haven asset when uncertainties are on the rise, however, this relationship tends to change during the short- to long-run. In this regard, our sample provides us with a unique opportunity to evaluate the safe haven hypothesis for Bitcoin, amid a time span with three Presidential elections in the US, and recently, an ongoing COVID-19 outbreak, which has been declared as a global pandemic. We have also supplemented our analysis with the bootstrap rolling window causality method, as a measure of robustness. In light of the recent COVID-19 pandemic, and the dynamic economic situation, our work provides valuable knowledge for investors, who wish to construct investment portfolios based on Bitcoin, and also provide insights for regulators about how to regulate the cryptocurrency speculation in an effective manner.

Suggested Citation

  • Umar, Muhammad & Su, Chi-Wei & Rizvi, Syed Kumail Abbas & Shao, Xue-Feng, 2021. "Bitcoin: A safe haven asset and a winner amid political and economic uncertainties in the US?," Technological Forecasting and Social Change, Elsevier, vol. 167(C).
    • Handle: RePEc:eee:tefoso:v:167:y:2021:i:c:s0040162521001128
    DOI: 10.1016/j.techfore.2021.120680
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    More about this item

    Keywords

    Bitcoin; Covid-19; Economic policy uncertainty; Partisan conflict; Quantile-On-Quantile; US;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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