Bitcoin Is Not the New Gold: A Comparison of Volatility, Correlation, and Portfolio Performance

Tony Klein, Pham Thu Hien and Thomas Walther

No 2018/01, QBS Working Paper Series from Queen's University Belfast, Queen's Business School

Abstract: Cryptocurrencies such as Bitcoin are establishing themselves as an investment asset and are often named the New Gold. This study, however, shows that the two assets could barely be more different. Firstly, we analyze and compare conditional variance properties of Bitcoin and Gold as well as other assets and nd differences in their structure. Secondly, we implement a BEKK-GARCH model to estimate time-varying conditional correlations. Gold plays an important role in financial markets with flight-to-quality in times of market distress. Our results show that Bitcoin behaves as the exact opposite and it positively correlates with downward markets. Lastly, we analyze the properties of Bitcoin as portfolio component and nd no evidence for hedging capabilities. We conclude that Bitcoin and Gold feature fundamentally different properties as assets and linkages to equity markets. Our results hold for the broad cryptocurrency index CRIX. As of now, Bitcoin does not reflect any distinctive properties of Gold other than asymmetric response in variance.

Keywords: BEKK; Bitcoin; CRIX; Cryptocurrency; Gold; GARCH; Conditional Correlation; Asymmetry; Long Memory (search for similar items in EconPapers)
JEL-codes: C10 C58 G11 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

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Related works:
Journal Article: Bitcoin is not the New Gold – A comparison of volatility, correlation, and portfolio performance (2018)
Working Paper: Bitcoin is not the New Gold - A Comparison of Volatility, Correlation, and Portfolio Performance (2018)
Working Paper: Bitcoin is not the New Gold - A Comparison of Volatility, Correlation, and Portfolio Performance (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:qmsrps:201801

DOI: 10.2139/ssrn.3146845

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