Bitcoin’s Role in Economic Turmoil: Safe Haven or Mirage?

This study investigates three specific research purposes: (1) to analyze the relationship between Bitcoin and gold, (2) to assess Bitcoin’s effectiveness as a hedge against the stock market, and (3) to explore the impact of market turmoil on the relationship between Bitcoin and the stock market. The study employs the generalized autoregressive conditional heteroskedasticity (GARCH) model to examine interactions among Bitcoin, gold, and the NASDAQ stock market, with money supply as a control variable to assess its influence on these relationships. The results reveal that Bitcoin does not function as a hedge for stock market, particularly NASDAQ, thus refuting the hypothesis about its hedging capabilities. Additionally, the money supply variable is found to lack significant relevance in elucidating the connection between Bitcoin and both NASDAQ and gold. However, during periods of market turmoil, a notable correlation between Bitcoin and NASDAQ emerged, with stronger associations being observed under such conditions. This validates the hypothesis related to market turmoil. Despite its characterization as “digital gold”, the study found no statistically significant relationship between Bitcoin and gold, although both assets exhibited similar price trends.

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