Crypto Havens During War Times? Evidence from the Russian Invasion of Ukraine

Abstract

The Russian invasion of Ukraine on 24th February 2022 resulted in a steep increase in a geopolitical risk index and, with imposed economic and political sanctions, caused both commodity and financial markets turmoil. In this paper, we investigate whether Bitcoin and Ether (traditional cryptocurrencies), Tether (fiat-backed stablecoin), and Solana (utility token) can be considered safe havens against each other, gold, stock and commodity indices, and foreign exchange currencies during wartime and focus on the effect of military and nuclear events. We employ cross-quantilogram methodology with moving 200 hours windows and use high-frequency hourly spot prices data between 2nd January 2022 and 17th July 2022. We determine that crypto assets primarily show weak safe-haven properties for the commodity market and strong safe-haven properties for foreign exchange currencies. Tether and Solana exhibit safe-haven properties for gold. While Tether is a weak safe haven for the stock market, other crypto assets cannot be effectively used by investors to diversify their stock portfolios during times of war.

Keywords: Bitcoin, Cross-quantilogram, Crypto assets, Invasion of Ukraine, Safe haven