A crypto safe haven against Bitcoin

Dirk G. Baur and Lai T. Hoang

Finance Research Letters, 2021, vol. 38, issue C

Abstract: The design of Bitcoin is closely related to gold which has led to the idea that Bitcoin has gold-like features such as being a store of value and a safe haven. However, given Bitcoin’s extreme volatility investors may rather need a safe haven against Bitcoin. We hypothesize that stablecoins provide such a safe haven and analyze high-frequency price changes of the largest stablecoins. We find that they act as safe havens, and Tether showing the strongest effect. The results demonstrate that Bitcoin investors seek out stablecoins when Bitcoin experiences extreme negative prices changes. Since stablecoins react to such price changes they are not stable at all times.

Keywords: Bitcoin; Tether; Cryptocurrencies; Stablecoins; Safe haven (search for similar items in EconPapers)
JEL-codes: E42 F31 G1 G2 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (58)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319312632

DOI: 10.1016/j.frl.2020.101431

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