Volume 20, Number 1, June 2025
| Diversifier, Hedge and Safe Heaven Properties of Bitcoin During the COVID-19: Evidence from Taiwan |
Abstract
This study employed the Dynamic Conditional Correlation (DCC)-GARCH model to investigate the hedging effectiveness of Bitcoin (BTC) concerning Taiwanese traditional assets, including Taiwan's stock index futures, electronic sector index futures, bonds, gold futures, and the USD/TWD exchange rate. The research findings revealed that BTC positively correlated with most of these assets before the COVID-19 pandemic. Furthermore, BTC was identified as a safe haven for 10-year government bonds. However, the study also found slightly distinct hedging effectiveness for BTC after the COVID-19 pandemic. When accounting for the impact of the pandemic, BTC was found to act as a hedging tool for Taiwan stock index futures and electronic sector index futures. These results underscore the interconnection between cryptocurrencies and traditional assets, offering practitioners opportunities to devise diversified investment and hedging strategies.
Keywords: Bitcoin, DCC-GARCH Model, Diversifier, Hedge, Safe Haven
JEL Classification: G11, G15, Q02