A Crypto Safe Haven Against Bitcoin

15 Pages Posted: 23 Sep 2019 Last revised: 30 Dec 2019

See all articles by Dirk G. Baur

Dirk G. Baur

University of Western Australia - Business School; Financial Research Network (FIRN)

Lai T. Hoang

The University of Western Australia

Date Written: September 21, 2019

Abstract

The design of Bitcoin is closely related to gold which has led to the idea that Bitcoin has gold-like features such as being a store of value and a safe haven. However, given Bitcoin's extreme volatility investors may rather need a safe haven against Bitcoin. We hypothesize that stablecoins provide such a safe haven and analyze high-frequency price changes of the largest stablecoins. We find that they act as safe havens, and Tether showing the strongest effect. The results demonstrate that Bitcoin investors seek out stablecoins when Bitcoin experiences extreme negative prices changes. Since stablecoins react to such price changes they are not stable at all times.

Keywords: Bitcoin, Tether, Cryptocurrencies, Stablecoins, Safe Haven

JEL Classification: E42, F31, G1, G2

Suggested Citation

Baur, Dirk G. and Hoang, Lai T., A Crypto Safe Haven Against Bitcoin (September 21, 2019). Available at SSRN: https://ssrn.com/abstract=3457688 or http://dx.doi.org/10.2139/ssrn.3457688

Dirk G. Baur

University of Western Australia - Business School ( email )

School of Business
35 Stirling Highway
Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Lai T. Hoang (Contact Author)

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia

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