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Bitcoin : safe haven for currencies in times of economic uncertainty

Olde, R.D. de (2021) Bitcoin : safe haven for currencies in times of economic uncertainty.

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Abstract:The aim of this paper is examining the role of Bitcoin as safe haven for currencies in periods of economic distress. More specifically, three currencies within two periods are assessed; the pound sterling during the Brexit period, the US dollar and Chinese yuan during the trade war period. The hypotheses were that Bitcoin functions as safe haven for the currencies during each of the periods. Data was sampled daily. For Brexit from June 2016 to January 2020, for the trade war from January 2018 until January 2020. The dynamic conditional correlation model (DCC-GARCH) was applied to estimate dynamic correlations between Bitcoin and each of the currencies. The results indicated that Bitcoin can function as weak safe haven for any of the currencies. The results are robust, as the weak safe haven function is still present when halving the sample period and when the data is sampled weekly. The results have high validity as it was shown that Bitcoin outperforms cryptocurrencies Ethereum, Litecoin and Ripple as well as traditional safe haven gold. The results imply it is possible for investors, traders and residents of a country to resort to safe haven Bitcoin in future periods of economic distress.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:83 economics, 85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/87450
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