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Analyzing Safe Haven, Hedging and Diversifier Characteristics of Heterogeneous Cryptocurrencies against G7 and BRICS Market Indexes

Author

Listed:
  • Manoel Fernando Alonso Gadi

    (Department of Computer Science, University of Alcala de Henares, 28805 Alcala de Henares, Spain
    These authors contributed equally to this work.)

  • Miguel-Angel Sicilia

    (Department of Computer Science, University of Alcala de Henares, 28805 Alcala de Henares, Spain
    These authors contributed equally to this work.)

Abstract

Cryptocurrency markets have experienced large growth in recent years, with an increase in the number and diversity of traded assets. Previous work has addressed the economic properties of Bitcoin with regards to its hedging or diversification properties. However, the surge of many alternatives, applications, and decentralized finance services on a variety of blockchain networks requires a re-examination of those properties, including indexes from outside the big economies and the inclusion of a variety of cryptocurrencies. In this paper, we report the results of studying the most representative cryptocurrency of each consensus mechanism by trading volume, forming a list of twenty-four cryptocurrencies from the 1st of January 2018 to the 30th of September 2022. Using the Baur and McDermott model, we examine hedge, safe haven, and diversifier properties of all assets for all G7 country’s major indexes as well as all BRICS major indexes breaking it down by two attributes: kind of blockchain technology and pre/during COVID health crisis. Results show that both attributes play an important role in the hedge, safe haven, and diversifier properties associated with the asset. Concretely: stablecoins appear to be the only ones to maintain hedge property in most analyzed markets pre- and during-COVID; Bitcoin investment properties shifted after the COVID crisis started; China and Russia stopped being correlated with the cryptocurrency after the COVID crisis hit.

Suggested Citation

  • Manoel Fernando Alonso Gadi & Miguel-Angel Sicilia, 2022. "Analyzing Safe Haven, Hedging and Diversifier Characteristics of Heterogeneous Cryptocurrencies against G7 and BRICS Market Indexes," JRFM, MDPI, vol. 15(12), pages 1-13, December.
    • Handle: RePEc:gam:jjrfmx:v:15:y:2022:i:12:p:572-:d:990896
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    References listed on IDEAS

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    4. Echaust, Krzysztof & Just, Małgorzata & Kliber, Agata, 2024. "To hedge or not to hedge? Cryptocurrencies, gold and oil against stock market risk," International Review of Financial Analysis, Elsevier, vol. 94(C).

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