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

Author

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  • Wafa Abdelmalek
  • Noureddine Benlagha

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.

Suggested Citation

  • Wafa Abdelmalek & Noureddine Benlagha, 2022. "On the safe-haven and hedging properties of Bitcoin: new evidence from COVID-19 pandemic," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 24(2), pages 145-168, December.
    • Handle: RePEc:eme:jrfpps:jrf-06-2022-0153
    DOI: 10.1108/JRF-06-2022-0153
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