Examination of Bitcoin Hedging, Diversification and Safe-Haven Ability During Financial Crisis: Evidence from Equity, Bonds, Precious Metals and Exchange Rate Markets

Mirzat Ullah (), Kazi Sohag, Svetlana Doroshenko and Oleg Mariev
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Mirzat Ullah: Ural Federal University
Kazi Sohag: Ural Federal University
Svetlana Doroshenko: Ural Federal University
Oleg Mariev: Ural Federal University

Computational Economics, 2025, vol. 66, issue 1, No 25, 835-867

Abstract: Abstract This study examines the investment strategies of Bitcoin along with equity, bonds, precious metals and the exchange rate volatility in the context of Russia–Ukraine conflict. The study analyzes daily data from January 1, 2018, to May 30, 2023, with unveiling a saga of financial resilience and strategic foresight. Against the backdrop of geopolitical upheaval, this study employs three sophisticated GARCH estimation models, artfully deciphering the nuanced hedging, diversification, and safe haven attributes of Bitcoin along with conventional financial assets within the Russian financial milieu. Within this intricate tapestry, the GJR-GARCH model emerges as a virtuoso, offering unparalleled precision in forecasting volatility and unraveling correlations among the underlined assets. Bitcoin's prowess as a hedge comes to the forefront, bestowing investors with the strategic advantage of risk diversification, while government bonds observed least attractive assets during the crisis period. Delving deeper into risk assessment, this research harnesses the potent tools of Value at Risk (VaR) and Conditional Value at Risk (CVaR). These estimations paint a vivid portrait of potential portfolio losses during times of crisis, providing a compass for prudent financial decision-making. In the crucible of crisis, Bitcoin emerges as a beacon of investment, witnessing a remarkable surge in adoption amidst heightened volatility and uncertainty. A symphony of market forces unfolds, where negative news resonates with greater intensity than its positive counterpart, underscoring the imperative of judicious asset allocation for effective risk mitigation. This study not only unfurls a compelling narrative for astute investors but also serves as a compass for policymakers navigating the treacherous waters of high market volatility and geopolitical uncertainties.

Keywords: Bitcoin; Gold; Equity; Bonds; Russian financial market; GARCH estimation; Hedging and diversification (search for similar items in EconPapers)
JEL-codes: C11 C60 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10614-024-10710-5

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