Are stablecoins better safe havens or hedges against global stock markets than other assets? Comparative analysis during the COVID-19 pandemic

Jingyu Feng, Ying Yuan and Mingxuan Jiang

International Review of Economics & Finance, 2024, vol. 92, issue C, 275-301

Abstract: This paper examines whether stablecoins act as diversifiers, hedges or safe havens against global stock markets during the COVID-19 pandemic, leveraging the DCC-GARCH model and dummy variable regression. In addition, we examine the dynamics of stablecoins' safe haven ability during the COVID-19 pandemic and diverse stages of the COVID-19 pandemic's development, and compare it with two traditional safe havens (gold and USD), as well as Bitcoin. Our findings reveal that both gold-pegged and USD-pegged stablecoins show a stronger hedging ability against global stock markets. In particular, USD-pegged stablecoins can be considered stable hedges and safe havens, especially during the different stages of the COVID-19 pandemic's development. Conversely, Bitcoin and traditional safe havens do not consistently provide stable hedge or safe haven properties.

Keywords: Stablecoins; Cryptocurrency; Pegging mechanism; Safe haven; Hedge (search for similar items in EconPapers)
JEL-codes: C32 G01 G15 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:92:y:2024:i:c:p:275-301

DOI: 10.1016/j.iref.2024.02.014

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