Hedge and Safe Haven Properties of Gold and Cryptocurrencies for the BİST100 Index: The Covid-19 Pandemic Effects

Abstract

After the Covid-19 outbreak, economic turmoil and severe market crashes have been observed around the world. During this crisis period, cyriptocurrencies and gold have become potentially good hedge and/or safe haven assets for especially the stock investors in emerging markets. This study investigates whether or not Bitcoin, Etherium, Ripple, Litecoin and gold markets have hedge and/or safe-haven properties for Borsa İstanbul through a regression system modeled under the assumption of GARCH(1,1) error terms. Daily frequency data covering the period September 4, 2017 through March 30, 2022 is used in the sample analysis. In addition, to separate out the effects of the Covid-19 pandemic on the analysis, full sample is divided into two subgroups and the estimations are made separately for the pre-Covid-19 period (before 31 December 2019) and the Covid-19 period (31 December 2019 and later).
 According to the estimation results, Litecoin emerges as a weak safe haven for Borsa İstanbul over the entire sample period, while Bitcoin and Etherium appear to be weak hedges in the pre-pandemic period. During the Covid-19 pandemic period, Etherium is shown to be a weak safe haven for the BİST100 index. Full sample and pre-pandemic data analysis reveal that, Bitcoin, Etherium and Ripple act as safe-haven markets in some cases when the BİST100 index returns hit lower than their 10% quantile value. After the outburst of the Covid-19 however, gold seems to act as a safe haven asset for Borsa İstanbul when the BİST100 index returns hit lower than their 1% quantile value. Based on the overall estimation results, gold stands out as a diversifier rather than a hedge and/or a safe haven asset for the BİST100 index.

Bitcoin’in Çeşitlendirme ve Riski Dengeleme Kabiliyeti

“…(2022) çalışmalarında Bitcoin ile BIST 100 arasında bir ilişkinin bulunmadığına dair sonuçlar raporlamışlardır. Serttaş (2022) ise Bitcoin'in BIST 100'e karşın COVID-19 öncesi zayıf riski dengeleme özelliği gösterdiğini bulgulamıştır.…”

“…Dirican and Canoz (2017), Gürsoy and Tunçel (2020), Gürsoy (2020), Tunçel et al (2022) found no significant relationship between Bitcoin and BIST 100. However, Serttaş (2022) discovered that Bitcoin exhibited a weak hedging feature against BIST 100 before the COVID-19 period. In the international literature, some studies have found evidence that Bitcoin provides hedging capabilities against stock markets (Dyhberg, 2016;Bouri et al, 2017a;Bouri et al, 2017b;Chan et al, 2019;Stensas et al, 2019).…”