What is a Hedge or Safe Haven Asset for Bitcoin Investors?

4 Pages Posted: 7 May 2019 Last revised: 5 Jun 2019

See all articles by Ryuta Sakemoto

Ryuta Sakemoto

Okayama University; Keio University

Alden Ho

affiliation not provided to SSRN

Yoshihiko Ichikawa

affiliation not provided to SSRN

Date Written: April 8, 2019

Abstract

This paper investigates a hedge and safe haven asset for Bitcoin investors. Bitcoin has been receiving high attention from finance investors because of its high upside return and volatility. The recent finance literature focused upon Bitcoin characteristics as an alternative asset. We take Bitcoin investors’ perspectives and consider how to manage the high volatility of Bitcoin. We employ the definitions of hedge and safe haven based on the finance literature and conduct the respective statistical analyses. Our definition distinguishes a weak and strong hedge (safe haven). Our empirical results show that traditional assets such as global equities and global bonds are weak hedges for Bitcoin. Furthermore, we observe that gold acts as a strong hedge against Bitcoin during an extreme bearish Bitcoin market, although the impact is marginal. There is no strong safe haven asset identified in our data period. Our results imply that the fundamental value of Bitcoin is still unclear, and it is difficult for Bitcoin investors to manage their portfolio risk.

Keywords: Bitcoin, Hedge, Safe Haven, GARCH

JEL Classification: C22, G11

Suggested Citation

Sakemoto, Ryuta and Ho, Alden and Ichikawa, Yoshihiko, What is a Hedge or Safe Haven Asset for Bitcoin Investors? (April 8, 2019). Available at SSRN: https://ssrn.com/abstract=3368241 or http://dx.doi.org/10.2139/ssrn.3368241

Ryuta Sakemoto (Contact Author)

Okayama University ( email )

1-1-1 Tsushimanaka, Kita Ward
Okayama, 700-0082
Japan

Keio University ( email )

2-15-45 Mita
Minato-ku
Tokyo, 108-8345
Japan

Alden Ho

affiliation not provided to SSRN

Yoshihiko Ichikawa

affiliation not provided to SSRN

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
102
Abstract Views
729
Rank
387,921
PlumX Metrics