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Ether: Bitcoin's competitor or ally?

Author

Listed:
  • Jamal Bouoiyour

    (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)

  • Refk Selmi

    (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)

Abstract

Although Bitcoin has long been dominant in the crypto scene, it is certainly not alone. Ether is another cryptocurrency related project that has attracted an intensive attention because of its additional features. This study seeks to test whether these cryptocurrencies differ in terms of their volatile and speculative behaviors, hedge, safe haven and risk diversification properties. Using different econometric techniques, we show that a) Bitcoin and Ether are volatile and relatively more responsive to bad news, but the volatility of Ether is more persistent than that of Bitcoin; b) for both cryptocurrencies, the exuberance and the collapse of bubbles were identified, but Bitcoin appears more speculative than Ether; c) there is negative and significant correlation between Bitcoin/Ether and other assets (S&P500 stocks, US bonds, oil), which would indicate that digital currencies can hedge against the price movements of these assets; d) there is negative tail independence between Bitcoin/Ether and other financial assets, implying that these cryptocurrencies exhibit the function of a weak safe haven; and e) The inclusion of Bitcoin/ Ether in a portfolio improve its efficiency in terms of higher reward-to-risk ratios. But investors who hold diversified portfolios made of stocks or bonds and Ether may face losses over bearish regime. In such situation, stock and bond investors may take a short position on Bitcoin.

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  • Jamal Bouoiyour & Refk Selmi, 2017. "Ether: Bitcoin's competitor or ally?," Working Papers hal-01567277, HAL.
    • Handle: RePEc:hal:wpaper:hal-01567277
    Note: View the original document on HAL open archive server: https://hal.science/hal-01567277
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    Cited by:

    1. Yosra Ghabri & Luu Duc Toan Huynh & Muhammad Ali Nasir, 2024. "Volatility spillovers, hedging and safe‐havens under pandemics: All that glitters is not gold!," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 1318-1344, April.
    2. Nader Trabelsi, 2018. "Are There Any Volatility Spill-Over Effects among Cryptocurrencies and Widely Traded Asset Classes?," JRFM, MDPI, vol. 11(4), pages 1-17, October.
    3. Guesmi, Khaled & Saadi, Samir & Abid, Ilyes & Ftiti, Zied, 2019. "Portfolio diversification with virtual currency: Evidence from bitcoin," International Review of Financial Analysis, Elsevier, vol. 63(C), pages 431-437.
    4. Hanif, Waqas & Areola Hernandez, Jose & Troster, Victor & Kang, Sang Hoon & Yoon, Seong-Min, 2022. "Nonlinear dependence and spillovers between cryptocurrency and global/regional equity markets," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    5. Bhuiyan, Rubaiyat Ahsan & Husain, Afzol & Zhang, Changyong, 2021. "A wavelet approach for causal relationship between bitcoin and conventional asset classes," Resources Policy, Elsevier, vol. 71(C).

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    Keywords

    speculation; hedge; volatility; Ether; Bitcoin; safe haven; risk diversification;
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