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Do NFTs act as a good hedge and safe haven against Cryptocurrency fluctuations?

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  • Kumar, Anoop S
  • Padakandla, Steven Raj

Abstract

In this study, we test the hedge and safe haven properties of NFTs against Bitcoin and Ethereum market fluctuations in the backdrop of COVID-19 and the Russia-Ukraine war. We employ daily returns of Bitcoin, Ethereum, and four NFTS, namely Decentraland, Cryptopunks, Cryptokitties, and SuperRare, from 04 April 2018 to 7 July 2022. For analytical purposes, we estimate dynamic hedge effectiveness and wavelet quantile correlations. The dynamic hedge effectiveness results confirm the NFTs' hedge ability against Bitcoin. The WQC results show that NFTs offer short, medium, and long-run hedge properties and short run safe haven property against Bitcoin. Further, we show that NFTs are at best a short to medium term diversifier against Ethereum fluctuations.

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  • Kumar, Anoop S & Padakandla, Steven Raj, 2023. "Do NFTs act as a good hedge and safe haven against Cryptocurrency fluctuations?," Finance Research Letters, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323005032
    DOI: 10.1016/j.frl.2023.104131
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    References listed on IDEAS

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    2. Díaz, Antonio & Esparcia, Carlos & Huélamo, Diego, 2023. "Unveiling the diversification capabilities of carbon markets in NFT portfolios," Finance Research Letters, Elsevier, vol. 58(PD).
    3. Alora, Aswin & Sahoo, Poonam & Sasidharan, Aghila, 2024. "Central bank digital currency adoption challenges- The case of an emerging nation," Finance Research Letters, Elsevier, vol. 59(C).

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    More about this item

    Keywords

    Non-fungible tokens; Cryptocurrency; Hedge; Safe haven; Portfolio diversification; COVID-19; Russia-Ukraine war;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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