Bitcoin – Hedge or Speculative Asset: Analysis of Its Role and Nature

Svetoslav Borisov

Economic Studies journal, 2024, issue 5, 148-170

Abstract: Bitcoin is regarded as a remarkable achievement of the Fourth Industrial Revolution and ranks among the most intricate technological and financial creations. It has long been the focus of attention of investors who are looking for a safe-haven asset. The purpose of this study is to check whether Bitcoin plays the role of a safe-haven asset (hedge). To achieve this, the impact of economic and political uncertainty (EPU) on the return and variation of Bitcoin is investigated. It is being analyzed whether, in comparison with the development of EPU, the returns and variations of Bitcoin show characteristics typical of safe-haven assets or those of ordinary speculative assets. As EPU levels elevate, it is anticipated that safe-haven assets like gold will see a rise in both their returns and variation, whereas typical speculative assets will experience heightened variation and diminished returns. The study uses ordinary linear regression and quantile regression models that cover data for the period between February 2013 and July 2023. These models play a crucial role in ascertaining if Bitcoin functions as a safe-haven asset during turbulent times and if it holds the capacity to serve as a hedge against economic uncertainty. The results of the study are of paramount importance for investors, as they help them decide whether to include Bitcoin in their portfolios for diversification and protection of their capital during unstable economic conditions.

JEL-codes: C52 C58 G15 G17 O33 (search for similar items in EconPapers)
Date: 2024
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