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Performance Analysis of Gold- and Fiat-Backed Cryptocurrencies: Risk-Based Choice for a Portfolio

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  • Muhammad Irfan

    (School of Management and Economics, Beijing Institute of Technology, Beijing 100081, China
    Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing 100081, China
    School of Business Administration, Ilma University, Karachi 75190, Pakistan)

  • Mubeen Abdur Rehman

    (Lahore Business School, University of Lahore, Lahore 54600, Pakistan)

  • Sarah Nawazish

    (Lahore Business School, University of Lahore, Lahore 54600, Pakistan)

  • Yu Hao

    (Beijing Key Lab of Energy Economics and Environmental Management, Beijing 100081, China
    Sustainable Development Research Institute for Economy and Society of Beijing, Beijing 100081, China
    Yangtze Delta Region Academy of Beijing Institute of Technology, Jiaxing 314001, China)

Abstract

This study aims to investigate the performance and behavior of fiat- and gold-backed cryptocurrencies to support stakeholders through the preparation of a portfolio from 1 January 2021 to 30 June 2022. Moreover, while searching for a hedge or a diversifier to construct a less risky portfolio with handsome returns, the prices of fiat-backed cryptocurrencies report high fluctuation during the sample period. ARIMA-EGARCH models have been employed to examine the volatile behavior of these cryptocurrencies. The empirical results are mixed as Bitcoin has been highly volatile during the economic recession. Due to its volatility, investors seek a safe haven. Ripple, on the other hand, shows low risk compared to Bitcoin. The results further reveal that PAX gold is more volatile than PM gold, while Bitcoin, being a highly traded cryptocurrency, is significantly correlated to other cryptocurrencies. The implications of this research showing the volatility of gold- and fiat-backed cryptocurrencies are equally important to stakeholders, such as investors, and policymakers.

Suggested Citation

  • Muhammad Irfan & Mubeen Abdur Rehman & Sarah Nawazish & Yu Hao, 2023. "Performance Analysis of Gold- and Fiat-Backed Cryptocurrencies: Risk-Based Choice for a Portfolio," JRFM, MDPI, vol. 16(2), pages 1-15, February.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:2:p:99-:d:1059656
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    References listed on IDEAS

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    1. Ghaemi Asl, Mahdi & Ben Jabeur, Sami & Ben Zaied, Younes, 2024. "Analyzing the interplay between eco-friendly and Islamic digital currencies and green investments," Technological Forecasting and Social Change, Elsevier, vol. 208(C).
    2. Afzol Husain & Kwang-Jing Yii & Chorng Yuan Fung & Richard Busulwa, 2025. "Portfolio risk of cryptocurrency inclusion: a comparison among conventional cryptocurrencies and asset-backed cryptocurrencies," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 15(3), pages 687-739, September.

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