The Coronavirus Lesson: Do Cryptocurrencies offer a Counter-cyclical Hedge?
CBRI Working Papers: Notes on the 21st Century, 2020
13 Pages Posted: 1 Apr 2020 Last revised: 3 Apr 2020
Date Written: Marchl 26, 2020
The price of cryptocurrencies has been a contentious practitioner and academic question, on one hand because of its nuanced relationship to traditional finance (with challenges of mainstreaming), and on the other hand regarding its role as a hedge against hyperinflation, financial crises, and excessive liquidity priming. This working paper tests the claim of whether cryptocurrencies truly offer a hedge against traditional instruments during market turmoil, using data from the initial phase of the 2020 coronavirus recession. The findings suggest that cryptocurrencies do not adequately adhere to the counter-cyclical hedging argument, nor do they manifest their cryptoanarchist underpinnings during market turmoil.
Keywords: COVID19, coronavirus, crisis, cryptocurrencies, bitcoin, blockchain, recession
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