Are cryptocurrencies a future safe haven for investors? The case of Bitcoin

Rashid A., Bakry W. & Al-Mohamad S. (2022). Are cryptocurrencies a future safe haven for investors? The case of Bitcoin. Economic Research-Ekonomska Istraživanja. DOI: 10.1080/1331677X.2022.2140443

Posted: 11 May 2020 Last revised: 7 Nov 2022

See all articles by Audil Khaki

Audil Khaki

American University of the Middle East; American University of the Middle East

Walid Bakry

Western Sydney University

Somar Al-Mohamad

American University of Middle East. Kuwait

Date Written: May 5, 2020

Abstract

The paper seeks to determine whether Bitcoin behaves differently
from forex markets and Gold, and whether it offers any diversifi-
cation, hedging, or safe-haven potential. A Markov regime-switch-
ing regression model is employed to determine the relationship
between Bitcoin, the real economic activity, foreign exchange
markets, financial markets, Energy, and Gold. The results indicate
that, unlike USD/EUR and Gold, besides other variables, Bitcoin
exhibits significant deviations in terms of its association with
other financial and economic variables. Bitcoin appears to be
strikingly positively associated with equity markets in both
regimes. This may limit its potential to either act as a hedge or a
safe-haven for US Equity markets. Bitcoin also deviates consider-
ably from Gold and USD/EUR as it is not affected by the same set
of variables as Gold or USD/EUR are under either regime.
Moreover, while Gold appears to offer considerably weak safe-
haven properties, particularly against equity, Bitcoin fails to be a
safe-haven for any of the assets under study. The results, how-
ever, indicate that the properties of Bitcoin may range between a
diversifier and a hedge, however, such potential of Bitcoin must
be viewed with caution owing to the large volatility exhibited
by Bitcoin.

Keywords: Cryptocurrency, Bitcoin, Blockchain, Digital Currencies, Financial Innovation

JEL Classification: C58, G11, F31

Suggested Citation

Khaki, Audil Rashid and Bakry, Walid and Al-Mohamad, Somar, Are cryptocurrencies a future safe haven for investors? The case of Bitcoin (May 5, 2020). Rashid A., Bakry W. & Al-Mohamad S. (2022). Are cryptocurrencies a future safe haven for investors? The case of Bitcoin. Economic Research-Ekonomska Istraživanja. DOI: 10.1080/1331677X.2022.2140443, Available at SSRN: https://ssrn.com/abstract=3593508 or http://dx.doi.org/10.2139/ssrn.3593508

Audil Rashid Khaki

American University of the Middle East ( email )

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Kuwait, Kuwait 15453
Kuwait
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+965 2225 1400 (Fax)

HOME PAGE: http://aum.edu.kw

American University of the Middle East ( email )

Eqaila
Kuwait
Kuwait, Ahmadi 15453
Kuwait
+965 2225 1400 (Phone)
+965 2225 1400 (Fax)

HOME PAGE: http://www.aum.edu.kw

Walid Bakry (Contact Author)

Western Sydney University ( email )

Sydney
1 Parramatta Square, 169 Macquarie Street, Parrama
Sydney, 2751
Australia
2 9685 9372 (Phone)

Somar Al-Mohamad

American University of Middle East. Kuwait ( email )

Block 6, Building 1
Egaila
Kuwait
2225 1400 (Phone)

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