Enduring relief or fleeting respite? Bitcoin as a hedge and safe haven for the US dollar

Thomas Conlon, Shaen Corbet and Richard McGee
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Richard McGee: University College Dublin

Annals of Operations Research, 2024, vol. 337, issue 1, No 3, 45-73

Abstract: Abstract Can technology protect investors from extreme losses? This paper investigates the short- and long-run hedging and safe haven properties of Bitcoin for the US dollar over the period 2010–2023, incorporating the COVID-19-related market turmoil. Our findings reveal that (i) Bitcoin acts as a strong hedge for all US dollar currency pairs examined, (ii) Bitcoin functions as a weak safe haven for the US dollar at short investment horizons, as indicated by a limited relationship during acute negative price movements, (iii) Bitcoin, instead of acting as a safe haven may, instead, increase aggregate risk at long horizons during periods of extreme losses. The analysis, performed using a series of horizon-dependent econometric tests, provides evidence of some US dollar risk-reduction benefits from Bitcoin but limited potential for enduring relief from long-run extreme negative US dollar rate movements.

Keywords: Bitcoin; Currency; Hedge; Safe haven; Wavelet; Quantile coherency (search for similar items in EconPapers)
JEL-codes: G10 G12 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10479-024-05884-y

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