Economic policy uncertainty and Bitcoin. Is Bitcoin a safe-haven asset?

Abstract

PurposeThe goal of this work is to determine whether Bitcoin behaves as a safe-haven asset. In order to do so, the influence of Economic Policy Uncertainty (EPU) on Bitcoin returns and volatility was studied.Design/methodology/approachIt is evaluated whether, when compared with the evolution of EPU, Bitcoin's returns and volatility show behaviours typical of safe havens or rather, those of conventional speculative assets. When faced with an increase in EPU, safe havens – such as gold – can be expected to increase their returns and volatility, while conventional speculative assets will increase their volatility and reduce their returns. This study uses simple linear regression and quantile regression models on a daily data sample from 19 July 2010 to 11 April 2019, to analyse the influence of EPU on the returns and volatility of Bitcoin and gold.FindingsBitcoin's returns and volatility increase during more uncertain times, just like gold, showing that Bitcoin acts not only as a means of exchange but also shows characteristics of investment assets, specifically of safe havens. These findings provide useful information to investors by allowing Bitcoin to be considered as a tool to protect savings in times of economic uncertainty and to diversify portfolios.Originality/valueThis study complements and expands current research by aiming to answer the question of whether Bitcoin is a simple speculative asset or a safe haven. The most significant contribution is to show that Bitcoin is not a mere speculative asset but behaves like a safe haven.

A differential evolution-based regression framework for forecasting Bitcoin price

“…Kristjanpoller et al ( 2020 ) and Zhang et al ( 2020 ) study the dynamic interplay of Bitcoin with other assets. Paule-Vianez et al ( 2020 ) report the safe heaven properties of Bitcoin. Kristoufek et al ( 2018 ) evaluate the inefficiency of the Bitcoin market.…”

“…Thus, despite the uncertain nature of Bitcoin prices (Paule Vianez et al 2020 ), the proposed approach can model its evolutionary patterns in an efficacious way. Kristoufek et al ( 2018 ) find the inefficiency structure of Bitcoin in the short run.…”

“…The interaction between Bitcoin returns and economic policy uncertainty (EPU) explores the hedging capacity of Bitcoin (Demir et al 2018 ; Paule Vianez et al 2020 ). Wang et al ( 2019 ) measure the risk spillover effect from EPU to Bitcoin and selected equity market uncertainty index, US EPU index, and implied volatility index as proxies for EPU.…”

Cryptocurrency volatility forecasting: What can we learn from the first wave of the COVID-19 outbreak?

“…This surge in Bitcoin prices, observed during the COVID-19 pandemic, has been accompanied by a significant amount of literature investigating whether cryptocurrencies, particularly the bitcoin, might serve as a refuge during a period of turmoil, such as the ongoing health crisis (Huynh et al, 2020 ; Paule-Vianez et al, 2020 ; Thampanya et al, 2020 ; Mnif et al, 2020 ; Madani et al, 2021 , among others). In this context, it might be important to analyse and propose further insights in terms of volatility modelling and cryptocurrency market forecasting, especially during crisis periods such as the COVID-19 pandemic, allowing investors and hedgers to minimize risks through portfolio diversification and develop appropriate hedging positions, and assist policymakers in formulating regulatory policies by refining the asset prices volatility prediction for risk assessment.…”

Bitcoin and CEE stock markets: fresh evidence from using the DECO-GARCH model and quantile on quantile regression

“…Specifically, during recent global economic and financial crises, the contentious traits of Bitcoin have been considered as a hedge or safe haven like gold. Bitcoin market is also considered as hedge or safe haven asset by an array of academics and international investors (Wei, 2018;Brauneis and Mestel, 2018;Bouri et al, 2019;Antonakakis et al, 2019;Paule-Vianez et al, 2020). Also, Bitcoin has been considered as an indispensable asset that demonstrates both the standard financial asset and a speculative asset (Wang et al, 2020b).…”