Chan, Jireh Yi-Le and Phoong, Seuk Wai and Phoong, Seuk Yen and Cheng, Wai Khuen and Chen, Yen-Lin (2023) The bitcoin halving cycle volatility dynamics and safe haven-hedge properties: A MSGARCH approach. Mathematics, 11 (3). ISSN 2227-7390, DOI https://doi.org/10.3390/math11030698.
Full text not available from this repository.Abstract
This paper introduces a unique perspective towards Bitcoin safe haven and hedge properties through the Bitcoin halving cycle. The Bitcoin halving cycle suggests that Bitcoin price movement follows specific sequences, and Bitcoin price movement is independent of other assets. This has significant implications for Bitcoin properties, encompassing its risk profile, volatility dynamics, safe haven properties, and hedge properties. Bitcoin's institutional and industrial adoption gained traction in 2021, while recent studies suggest that gold lost its safe haven properties against the S&P500 in 2021 amid signs of funds flowing out of gold into Bitcoin. Amid multiple forces at play (COVID-19, halving cycle, institutional adoption), the potential existence of regime changes should be considered when examining volatility dynamics. Therefore, the objective of this study is twofold. The first objective is to examine gold and Bitcoin safe haven and hedge properties against three US stock indices before and after the stock market selloff in March 2020. The second objective is to examine the potential regime changes and the symmetric properties of the Bitcoin volatility profile during the halving cycle. The Markov Switching GARCH model was used in this study to elucidate regime changes in the GARCH volatility dynamics of Bitcoin and its halving cycle. Results show that gold did not exhibit safe haven and hedge properties against three US stock indices after the COVID-19 outbreak, while Bitcoin did not exhibit safe haven or hedge properties against the US stock market indices before or after the COVID-19 pandemic market crash. Furthermore, this study also found that the regime changes are associated with low and high volatility periods rather than specific stages of a Bitcoin halving cycle and are asymmetric. Bitcoin may yet exhibit safe haven and hedge properties as, at the time of writing, these properties may manifest through sustained adoption growth.
| Item Type: | Article |
|---|---|
| Funders: | Ministry of Education, Malaysia (FRGS/1/2019/STG06/UM/02/9), National Science and Technology Council in Taiwan (MOST-109-2628-E-027-004-MY3), National Science and Technology Council in Taiwan (MOST-111-2218-E-027-003), National Science and Technology Council in Taiwan (MOST-110-2622-8-027-006), Ministry of Education, Taiwan (1112303249) |
| Uncontrolled Keywords: | MSGARCH; Symmetry; Regime changes; Safe haven; Hedge properties; Bitcoin; Gold |
| Subjects: | Q Science > QA Mathematics |
| Divisions: | Institute of Advanced Studies Faculty of Business and Economics > Department of Management |
| Depositing User: | Ms Zaharah Ramly |
| Date Deposited: | 05 Jul 2023 04:32 |
| Last Modified: | 05 Jul 2023 04:32 |
| URI: | http://eprints.um.edu.my/id/eprint/38680 |
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