On the Hedge and Safe Haven Properties of Bitcoin: Is it Really More than a Diversifier?

Abstract

This paper uses a dynamic conditional correlation model to examine whether Bitcoin can act as a hedge and safe haven for major world stock indices, bonds, oil, gold, the general commodity index and the US dollar index. Daily and weekly data span from July 2011 to December 2015. Overall, the empirical results indicate that Bitcoin is a poor hedge and is suitable for diversification purposes only. However, Bitcoin can only serve as a strong safe haven against weekly extreme down movements in Asian stocks. We also show that Bitcoin hedging and safe haven properties vary between horizons.

Keywords: Bitcoin, cryptocurrency, diversifier, hedge, safe haven, DCC

JEL Classification: G11, G15, Q02