Are Cryptocurrencies a Safe Haven for Equity Markets? An International Perspective from the COVID-19 Pandemic

26 Pages Posted: 19 May 2020 Last revised: 18 Jun 2020

See all articles by Thomas Conlon

Thomas Conlon

University College Dublin

Shaen Corbet

Dublin City University ; University of Waikato - Management School

Richard McGee

Smurfit Business School

Date Written: May 10, 2020

Abstract

The COVID-19 pandemic provided the first widespread bear market conditions since the inception of cryptocurrencies. We test the widely mooted safe haven properties of Bitcoin, Ethereum and Tether from the perspective of international equity index investors. Bitcoin and Ethereum are not a safe haven for the majority of international equity markets examined, in fact increasing portfolio downside risk. Only investors in the Chinese CSI 300 index realized modest downside risk benefits, but only from small relative allocations to Bitcoin or Ethereum. As Tether successfully maintained its peg to the US dollar during the COVID-19 turmoil, it acted as a safe haven investment for all of the international indices examined. We caveat the latter findings with a warning that this dollar peg has not always been maintained, impairing the earlier downside risk hedging properties of Tether.

Keywords: Cryptocurrency, Bitcoin, Ethereum, Tether, Safe Haven, Downside Risk, COVID-19

Suggested Citation

Conlon, Thomas and Corbet, Shaen and McGee, Richard, Are Cryptocurrencies a Safe Haven for Equity Markets? An International Perspective from the COVID-19 Pandemic (May 10, 2020). Available at SSRN: https://ssrn.com/abstract=3601045 or http://dx.doi.org/10.2139/ssrn.3601045

Thomas Conlon

University College Dublin ( email )

Smurfit Graduate Business School
Blackrock
Co. Dublin, n/a
Ireland

HOME PAGE: http://www.ucd.ie/bankingfinance/staff/drthomasconlon/

Shaen Corbet

Dublin City University ( email )

Dublin 9
Ireland

University of Waikato - Management School ( email )

Hamilton
New Zealand

Richard McGee (Contact Author)

Smurfit Business School ( email )

Blackrock, Co. Dublin
Ireland

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