Is Bitcoin the New Digital Gold? Evidence From Extreme Price Movements in Financial Markets

85 Pages Posted: 26 Sep 2018 Last revised: 5 Dec 2019

See all articles by Konstantinos Gkillas

Konstantinos Gkillas

Hellenic Mediterranean University

François Longin

ESSEC Business School

Date Written: January 18, 2019


Is bitcoin the new digital gold? To answer this question, we investigate the potential benefits of bitcoin during extremely volatile periods. We use the multivariate extreme value theory, which is the appropriate statistical approach to model the tail dependence structure of the return distribution. First, considering positions in equity markets, we find - similarly to previous studies - that the correlation of extreme returns increases during stock market crashes and decreases during stock market booms. Second, by combining each equity market with bitcoin, we find that the correlation of extreme returns sharply decreases during both market booms and crashes, indicating that bitcoin could provide the sought-after benefits of diversification during turbulent times. A similar result is obtained for gold, confirming its well-recognized status as a safe haven when a crisis occurs. Finally, we find a low extreme correlation between bitcoin and gold, which implies that both assets can be used together in times of turbulence in financial markets to protect equity positions. From a portfolio management perspective, we show that the introduction of bitcoin (along with gold) substantially improves the performance of equity positions under tail risk constraints. Such evidence indicates that bitcoin can be considered the new digital gold. However, gold itself can still play an important role in portfolio risk management.

Keywords: bitcoin; diversification benefits; extreme correlation; extreme value theory; gold; portfolio risk management; tail dependence

JEL Classification: C46, F38, G01

Suggested Citation

Gkillas, Konstantinos and Longin, François, Is Bitcoin the New Digital Gold? Evidence From Extreme Price Movements in Financial Markets (January 18, 2019). Available at SSRN: or

Konstantinos Gkillas (Contact Author)

Hellenic Mediterranean University ( email )

Heraklion, 71410


François Longin

ESSEC Business School ( email )

Avenue Bernard Hirsch
BP 105 Cergy Cedex, 95021


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