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Enduring relief or fleeting respite? Bitcoin as a hedge and safe haven for the US dollar

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  • Thomas Conlon

    (University College Dublin)

  • Shaen Corbet

    (Dublin City University
    University of Waikato)

  • Richard McGee

    (University College Dublin)

Abstract

Can technology protect investors from extreme losses? This paper investigates the short- and long-run hedging and safe haven properties of Bitcoin for the US dollar over the period 2010–2023, incorporating the COVID-19-related market turmoil. Our findings reveal that (i) Bitcoin acts as a strong hedge for all US dollar currency pairs examined, (ii) Bitcoin functions as a weak safe haven for the US dollar at short investment horizons, as indicated by a limited relationship during acute negative price movements, (iii) Bitcoin, instead of acting as a safe haven may, instead, increase aggregate risk at long horizons during periods of extreme losses. The analysis, performed using a series of horizon-dependent econometric tests, provides evidence of some US dollar risk-reduction benefits from Bitcoin but limited potential for enduring relief from long-run extreme negative US dollar rate movements.

Suggested Citation

  • Thomas Conlon & Shaen Corbet & Richard McGee, 2024. "Enduring relief or fleeting respite? Bitcoin as a hedge and safe haven for the US dollar," Annals of Operations Research, Springer, vol. 337(1), pages 45-73, June.
    • Handle: RePEc:spr:annopr:v:337:y:2024:i:1:d:10.1007_s10479-024-05884-y
    DOI: 10.1007/s10479-024-05884-y
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    More about this item

    Keywords

    Bitcoin; Currency; Hedge; Safe haven; Wavelet; Quantile coherency;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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