Cryptocurrencies fall from grace: Snatched safe flight to which haven during Russia-Ukraine conflict?

Suraj Velip and Mrunali Jambotkar

Studies in Economics and Econometrics, 2025, vol. 49, issue 1, 76-85

Abstract: The unprecedented upheaval in an economic and financial system facilitates herding behaviour and flight-to-safety (FTS) episodes from a riskier asset into a safer one. The Russia-Ukraine conflict shows that the financial market assets are still prone to external shock. In line with this, the study explores the inconclusive insights on an FTS from cryptocurrencies to US treasury securities. The paper employs dynamic conditional correlation – generalized autoregressive conditional heteroskedasticity (DCC-GARCH) to test the FTS episode for a period from February 24, 2022 to February 23, 2023. The findings hold a sizeable negative and significant volatility coefficient, particularly DCCα, which directs to support the notion of short-lived FTS from cryptocurrencies to treasury securities during the invasion period. Nevertheless, some evidence of the positive volatility effect points out the risk diversification benefits. The results also show flight-to-quality from BTC, ETH, USDT, BNB, ADA and MATIC to the US dollar index (USDX), however, for other cryptocurrencies, it acts as a diversifier. We unfolded several implications that could be interesting for a market participant looking for evidence on the behaviour of cryptocurrencies and govt. backed securities during times of market uncertainty in the future.

Date: 2025
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DOI: 10.1080/03796205.2024.2441820

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