Anchoring on safe haven: Russia–Ukraine war effects on the cryptocurrency market

To investigate whether investors display anchoring bias when seeking safe havens during market downturns, we analyze the cryptocurrency market amid the Russia–Ukraine war. We find that as the conflict intensifies, demand for cryptocurrencies — particularly those previously recognized as safe havens during the COVID-19 pandemic — significantly increases. However, this surge in demand is accompanied by negative returns and heightened risk, indicating that investors might overestimate the safety of cryptocurrencies based on past performance. Moreover, we show that cryptocurrencies positively correlate with S&P 500 and gold during the conflict, diminishing their diversification benefits. Also, cryptocurrencies should not be regarded as safe haven assets for the U.S. dollar or crude oil during the war. These results suggest that investors anchor on historical safe haven attributes, fail to properly adjust their expectations with new information, and overlook the associated risks in volatile markets. The findings are robust to a placebo test, cannot be explained by crypto-based sanction circumvention, and are driven by a geopolitical risk channel. Our study underscores the risk management implications of anchoring bias and highlights the pervasive influence of behavioral biases in the cryptocurrency market.