What can we learn from the convenience yield of Bitcoin? Evidence from the COVID-19 crisis

Gideon Bruce Arkorful, Haiqiang Chen, Ming Gu and Xiaoqun Liu

International Review of Economics & Finance, 2023, vol. 88, issue C, 141-153

Abstract: In this study, we employ the cost of carrying model to estimate the convenience yields of gold and bitcoin. Using the COVID-19 crisis as a demand shock, we show that the convenience yield of bitcoin decreases, but the convenience yield of gold increases during the pandemic. We further document an inverse relationship between bitcoin user adoption and convenience yield. Such relationship intensifies during the COVID-19 crisis and is mainly driven by the unexpected component of bitcoin's unique active addresses. Our overall findings indicate that gold rather than bitcoin attracts flight-to-safety investors in the pandemic. We provide supporting evidence for the decrease in bitcoin convenience yield, which can be explained by the sudden increase in active trading addresses that short-term speculators own most.

Keywords: Bitcoin; Convenience yield; Safe-haven; COVID pandemic (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:88:y:2023:i:c:p:141-153

DOI: 10.1016/j.iref.2023.06.029

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