Relationship between Bitcoin and the stock market – can bitcoin serve as a safe haven for investors?

Authors

  • Julija Božan Faculty of Economics, Business and Tourism, University of Split, Split, Croatia; OTP Leasing d.d., Split, Croatia
  • Josip Visković Faculty of Economics, Business and Tourism, University of Split, Split, Croatia https://orcid.org/0000-0002-8797-1496

DOI:

https://doi.org/10.48188/so.5.6

Keywords:

Bitcoin, S&P500, volatility, MGARCH, safe haven, crisis

Abstract

Aim: As a new asset class, Bitcoin and other cryptocurrencies can be interesting for investors in the context of return stabilization, especially in times of crisis. We aimed to analyse whether Bitcoin can serve as a safe haven for investors in times of crisis.

Methods: The data covers the period from September 17, 2014, to April 29, 2021, with 382 observations. Yahoo! Finance served as the source for the Bitcoin prices and Investing.com for the values of the Standard & Poor’s 500 (S&P500) Index. We used the maximum likelihood method to estimate the dynamic conditional correlation model.

Results: Due to the high volatility during the analysed period, Bitcoin achieved a higher risk-adjusted return compared to the S&P500 Index. The DCC model showed a positive correlation between the returns of the S&P500 and Bitcoin during the analysed period.

Conclusions: Our results suggest that Bitcoin may not serve as a safe haven for investors in times of crisis. However, its role in this context should be further evaluated by examining its relationship with other traditional asset classes (gold, commodities) and other types of cryptocurrencies such as stablecoins.

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Published

2024-08-23

Issue

Vol. 5 (2024): ST-OPEN • 2024

Section

Research Articles

Categories

License

Copyright (c) 2024 Julija Božan, Josip Visković

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work’s authorship and initial publication in this journal.