This study aims to investigate the safe-haven and hedging properties of Bitcoin against a wide variety of conventional assets before and during the coronavirus disease 2019 (COVID-19) pandemic.
This paper uses a smooth transition regression (STR) to jointly test the hedging properties of Bitcoin in normal conditions and Bitcoin's safe-haven properties in extreme stock market conditions.
Highlighting the results, the authors show that Bitcoin is able to provide safe-haven feature during the COVID-19 pandemic period while Bitcoin serves as a hedge tool in the pre-COVID-19 pandemic period. The findings also show that the prowess of the safe-haven/hedge nature is sensitive to the type of the asset market and the time horizon when switching from daily to weekly frequency data.
This is one of the first studies that conduct a combined analysis of the safe-haven and hedging capabilities of Bitcoin against several asset classes using an STR method. This study uses the longest sample period to yet, allowing researchers to examine Bitcoin's safe-haven and hedging features both before and after the COVID-19 pandemic.
