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Is the status of gold threatened by Bitcoin?

Author

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  • Chi-Wei Su
  • Meng Qin
  • Ran Tao
  • Xiaoyan Zhang

Abstract

This paper evinces the ability of gold to avoid risks during periods with great fluctuations in the Bitcoin market. We apply bootstrap full- and subsample rolling-window Granger causality tests to explore the causal relationship between Bitcoin price (BCP) and gold price (GP). The empirical results show that an increase in BCP can cause GP to decrease, indicating that the prosperity of the Bitcoin market undermines the hedging ability of gold. However, a decrease in BCP causes GP to increase, and it also emphasizes that the ability of gold to avoid risks persists. Hence, the status of gold will not be completely threatened by Bitcoin, and they are complementary to each other instead of in competition. In turn, both positive and negative influences of GP on BCP suggest that fluctuations in BCP can be predicted through the gold market. In situations of severe global uncertainty and complicated investment environments, investors can benefit from complementary markets to optimize their asset allocation. Additionally, countries can grasp the trends in Bitcoin and gold prices to prevent large fluctuations in both markets and to reduce the uncertainty of the financial system.

Suggested Citation

  • Chi-Wei Su & Meng Qin & Ran Tao & Xiaoyan Zhang, 2020. "Is the status of gold threatened by Bitcoin?," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 33(1), pages 420-437, January.
    • Handle: RePEc:taf:reroxx:v:33:y:2020:i:1:p:420-437
    DOI: 10.1080/1331677X.2020.1718524
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    Cited by:

    1. Qin, Meng & Zhang, Xiaojing & Li, Yameng & Badarcea, Roxana Maria, 2023. "Blockchain market and green finance: The enablers of carbon neutrality in China," Energy Economics, Elsevier, vol. 118(C).
    2. Su, Chi-Wei & Yang, Shengjie & Qin, Meng & Lobonţ, Oana-Ramona, 2023. "Gold vs bitcoin: Who can resist panic in the U.S.?," Resources Policy, Elsevier, vol. 85(PA).
    3. Jing, Ruixue & Rocha, Luis E.C., 2023. "A network-based strategy of price correlations for optimal cryptocurrency portfolios," Finance Research Letters, Elsevier, vol. 58(PC).
    4. Li, Jingwen & Wang, Yue & Song, Yubing & Su, Chi Wei, 2023. "How resistant is gold to stress? New evidence from global supply chain," Resources Policy, Elsevier, vol. 85(PB).
    5. Qin, Meng & Su, Chi-Wei & Pirtea, Marilen Gabriel & Dumitrescu Peculea, Adelina, 2023. "The essential role of Russian geopolitics: A fresh perception into the gold market," Resources Policy, Elsevier, vol. 81(C).
    6. Vesna Bucevska & Borjan Gjelevski & Lea Matevska, 2023. "Oil Prices And Their Long-Term Relationship With Macroeconomic And Financial Indicators," Economic Review: Journal of Economics and Business, University of Tuzla, Faculty of Economics, vol. 21(1), pages 3-24, May.

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