Novel symbolic detection for flight-to-safety in Bitcoin and investigation of information flow dynamics alongside multiple markets

Yuhan Wang and Di Xiao

Physica A: Statistical Mechanics and its Applications, 2025, vol. 660, issue C

Abstract: This paper employs novel symbolic methods to analyze asset price dynamics, focusing on Bitcoin alongside gold, bonds, stocks, and commodities to explore their interplay over the time period from 2015 to 2023. First, a new approach for detecting “flight to safety” (FTS) events is proposed, which is based on symbolizing asset returns to quantify substantial inverse price movements. Positioning Bitcoin as a hedging instrument to focus on its potential to attract capital in times of market turmoil, FTS events identified by the new approach effectively reflect major economic and political events, such as Brexit, the COVID-19 pandemic, and the Russia–Ukraine conflict. In addition, symbolic transfer entropy (STE) is utilized to analyze the information flow dynamics among these assets, revealing that Bitcoin primarily acts as a receiver of information. And in the first half of 2020, there are significant time-varying fluctuations in the flow of information. The most common providers of the largest information input for Bitcoin are the treasury bond index and precious metals of commodity index, overall, and this role alternates between bonds and different commodity indices when comparing across FTS post-quarter periods. An information flow network through maximum spanning tree visualization demonstrates Bitcoin’s central position as a hub of information receiver in general, yet in a dynamic perspective, Bitcoin tends to receive information from more diverse markets until 2020, the year of most evident FTS days, and has since narrowed markedly to absorbing information primarily from the commodity markets.

Keywords: Bitcoin; Asset price dynamics; Symbolic transfer entropy; Flight to safety; Information flow network (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:660:y:2025:i:c:s037843712500010x

DOI: 10.1016/j.physa.2025.130358

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