Intraday hedging and the safe haven role of Bitcoin

Abstract

We investigate intraday hedging and the safe haven role of Bitcoin for stocks, currencies, and oil. The hedge concept depends on non-correlation or negative interaction, on average, while the safe haven concept depends on non-correlation or negative correlation in times of market turmoil. We look at Bitcoin’s ability to be a hedge or safe haven asset with standard financial assets by considering a short investment horizon using high frequency data. Accordingly, we propose a new measure, the q-detrending moving average cross-correlation coefficient, to characterise intraday market interdependence between Bitcoin and these assets during medium and extreme movements. During medium fluctuations, Bitcoin is a weak hedge against currencies, oil, and stocks. During high fluctuations, we find a negative relationship between Bitcoin and oil, meaning Bitcoin can serve as a safe haven against extreme down movements in this market. However, Bitcoin is a weak safe haven asset for the other two markets.