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Tracking safe haven properties of cryptocurrencies during the COVID-19 pandemic: A smooth transition approach

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  • Melki, Abir
  • Nefzi, Nourhaine

Abstract

The study aims to examine the hedge and safe-haven properties of three heavyweight cryptocurrencies—Bitcoin, Ripple, and Ethereum—against the stock, commodity, and foreign exchange markets. The study sample covers the period of August 2011 to September 2020 and therefore includes the current coronavirus disease-2019 (COVID-19) crisis. Using a logistic smooth transition regression model (LSTR2), the study findings indicate the ability of monitored cryptocurrencies to act as safe-haven assets, but such behavior differs across markets. Interestingly, during the pandemic period, Ethereum provides the strongest safe haven function for the commodity market. According to our findings, we are mindful of that the COVID-19 outbreak provides an exciting opportunity to advance our knowledge of the prominence of new coins such as Ethereum that are gradually gaining supremacy in the cryptocurrency market to the detriment of traditional cryptocurrencies like Bitcoin.

Suggested Citation

  • Melki, Abir & Nefzi, Nourhaine, 2022. "Tracking safe haven properties of cryptocurrencies during the COVID-19 pandemic: A smooth transition approach," Finance Research Letters, Elsevier, vol. 46(PA).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pa:s1544612321002993
    DOI: 10.1016/j.frl.2021.102243
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    References listed on IDEAS

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    Cited by:

    1. Tarchella, Salma & Khalfaoui, Rabeh & Hammoudeh, Shawkat, 2024. "The safe haven, hedging, and diversification properties of oil, gold, and cryptocurrency for the G7 equity markets: Evidence from the pre- and post-COVID-19 periods," Research in International Business and Finance, Elsevier, vol. 67(PB).
    2. Andreas Renard Widarto & Harjum Muharam & Sugeng Wahyudi & Irene Rini Demi Pangestuti, 2022. "ASEAN-5 and Crypto Hedge Fund: Dynamic Portfolio Approach," SAGE Open, , vol. 12(2), pages 21582440221, April.
    3. Chowdhury, Mohammad Ashraful Ferdous & Abdullah, Mohammad & Masih, Mansur, 2022. "COVID-19 government interventions and cryptocurrency market: Is there any optimum portfolio diversification?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).
    4. Zarifhonarvar, Ali, 2022. "The Effect of Covid Pandemic on Cryptocurrency Markets; A Literature Review," EconStor Preprints 266369, ZBW - Leibniz Information Centre for Economics.
    5. Choudhury, Tonmoy & Kinateder, Harald & Neupane, Biwesh, 2022. "Gold, bonds, and epidemics: A safe haven study," Finance Research Letters, Elsevier, vol. 48(C).
    6. Ştefan Cristian Gherghina & Liliana Nicoleta Simionescu, 2023. "Exploring the asymmetric effect of COVID-19 pandemic news on the cryptocurrency market: evidence from nonlinear autoregressive distributed lag approach and frequency domain causality," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-58, December.
    7. Susovon Jana & Tarak Nath Sahu, 2024. "Identifying Cryptocurrencies as Diversifying Assets and Safe Haven in the Indian Stock Market," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 31(4), pages 925-944, December.

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