Are Cryptos Safe-Haven Assets during Covid-19? Evidence from Wavelet Coherence Analysis

ABSTRACT

This study adds to the inconclusive debate on safe-haven properties of cryptocurrencies during Covid-19 by analyzing the use of wavelet coherence framework on the global Covid-19 fear index, cryptocurrency implied volatility index (VCRIX), and cryptocurrency returns. Our findings show that a non-financial market-based proxy of market stress that represents fear of households and retail investors reveals cryptocurrencies as safe-haven assets; however, a financial market-based proxy of market turbulence exposes that cryptocurrencies behave like traditional assets during the times of Covid-19 pandemic. Our findings support that long-term investors can invest in the cryptocurrency market to hedge the risks during Covid-19 pandemic.

KEYWORDS:

• Wavelet coherence
• global Covid-19 fear index
• cryptocurrency
• VCRIX
• Safe-haven

JEL:

• G11
• G15
• Q31

Notes

1. See https://coinmarketcap.com/

2. https://www.who.int/dg/speeches/detail/who-director-general-s-opening-remarks-at-the-media-briefing-on-covid-19–3-march-2020

Additional information

Funding

This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors