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A crypto safe haven against Bitcoin

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  • Baur, Dirk G.
  • Hoang, Lai T.

Abstract

The design of Bitcoin is closely related to gold which has led to the idea that Bitcoin has gold-like features such as being a store of value and a safe haven. However, given Bitcoin’s extreme volatility investors may rather need a safe haven against Bitcoin. We hypothesize that stablecoins provide such a safe haven and analyze high-frequency price changes of the largest stablecoins. We find that they act as safe havens, and Tether showing the strongest effect. The results demonstrate that Bitcoin investors seek out stablecoins when Bitcoin experiences extreme negative prices changes. Since stablecoins react to such price changes they are not stable at all times.

Suggested Citation

  • Baur, Dirk G. & Hoang, Lai T., 2021. "A crypto safe haven against Bitcoin," Finance Research Letters, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319312632
    DOI: 10.1016/j.frl.2020.101431
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    References listed on IDEAS

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    More about this item

    Keywords

    Bitcoin; Tether; Cryptocurrencies; Stablecoins; Safe haven;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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