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Do conventional currencies hedge cryptocurrencies?

Author

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  • Shahzad, Syed Jawad Hussain
  • Balli, Faruk
  • Naeem, Muhammad Abubakr
  • Hasan, Mudassar
  • Arif, Muhammad

Abstract

We examine the hedge and safe-haven properties of conventional currencies for four cryptocurrencies — Bitcoin, Ethereum, Ripple, and Litecoin. We extend the Baur and McDermott (2010) framework, where the safe-haven role is examined against reverse explosiveness in cryptocurrency prices. Our results suggest that the Japanese yen is the most consistent hedger for cryptocurrencies, followed by the British pound, Chinese yuan, and the Euro. All currencies, except the Euro, perform a safe-haven role for Bitcoin and its fork, Litecoin. The safe-haven potential of the Euro, Japanese Yen, and Chinese Yuan is also confirmed during the negative explosiveness periods of the cryptocurrency market.

Suggested Citation

  • Shahzad, Syed Jawad Hussain & Balli, Faruk & Naeem, Muhammad Abubakr & Hasan, Mudassar & Arif, Muhammad, 2022. "Do conventional currencies hedge cryptocurrencies?," The Quarterly Review of Economics and Finance, Elsevier, vol. 85(C), pages 223-228.
    • Handle: RePEc:eee:quaeco:v:85:y:2022:i:c:p:223-228
    DOI: 10.1016/j.qref.2021.01.008
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    References listed on IDEAS

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    Cited by:

    1. Pham, Linh & Huynh, Toan Luu Duc & Hanif, Waqas, 2023. "Time-varying asymmetric spillovers among cryptocurrency, green and fossil-fuel investments," Global Finance Journal, Elsevier, vol. 58(C).
    2. Conlon, Thomas & Corbet, Shaen & Hou, Yang (Greg) & Hu, Yang & Oxley, Les, 2024. "Bitcoin forks: What drives the branches?," Research in International Business and Finance, Elsevier, vol. 69(C).
    3. Bouteska, Ahmed & Abedin, Mohammad Zoynul & Hajek, Petr & Yuan, Kunpeng, 2024. "Cryptocurrency price forecasting – A comparative analysis of ensemble learning and deep learning methods," International Review of Financial Analysis, Elsevier, vol. 92(C).
    4. Samet Gunay & Kerem Kaskaloglu & Shahnawaz Muhammed, 2021. "Bitcoin and Fiat Currency Interactions: Surprising Results from Asian Giants," Mathematics, MDPI, vol. 9(12), pages 1-18, June.
    5. Li, Jingwen & Wang, Yue & Song, Yubing & Su, Chi Wei, 2023. "How resistant is gold to stress? New evidence from global supply chain," Resources Policy, Elsevier, vol. 85(PB).
    6. Ahmed BenSaïda, 2023. "The linkage between Bitcoin and foreign exchanges in developed and emerging markets," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-27, December.
    7. Abakah, Emmanuel Joel Aikins & Wali Ullah, G M & Abdullah, Mohammad & Lee, Chi-Chuan & Sulong, Zunaidah, 2024. "Correlation structure between fiat currencies and blockchain assets," Finance Research Letters, Elsevier, vol. 62(PA).

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    More about this item

    Keywords

    Hedge; Safe-haven; Cryptocurrency; Currency;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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