Abstract
The paper seeks to determine whether Bitcoin behaves differently from forex markets and Gold, and whether it offers any diversification, hedging, or safe-haven potential. A Markov regime-switching 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 considerably 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 safehaven properties, particularly against equity, Bitcoin fails to be a safe-haven for any of the assets under study. The results, however, 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.
| Original language | English |
|---|---|
| Article number | 2140443 |
| Pages (from-to) | 80-93 |
| Number of pages | 27 |
| Journal | Economic Research-Ekonomska Istrazivanja |
| Volume | 36 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - 2023 |
Bibliographical note
Publisher Copyright:© 2022 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.