Gold and Bitcoin as hedgers and safe havens: Perspective from nonlinear dynamics

Abstract

This study explores the hedge and safe-haven properties of gold and Bitcoin against several financial asset classes: (i) developed market equities, (ii) emerging market equities, (iii) bonds, (iv) commodities, (v) energy, and (vi) cryptocurrencies. By employing multifractal cross-correlation analysis, the paper investigates whether gold or Bitcoin qualify as hedgers under stable market conditions or as safe havens during extreme market movements. The analysis of individual assets reveals that the variables exhibit multifractality, statistical self-similarity, and market inefficiency. Furthermore, the hedge analysis of bivariate portfolios indicates that neither gold nor Bitcoin can be classified as a hedge or safe haven for financial markets. The only notable risk reduction advantage is observed in the gold-bond pair. This study provides valuable insights into hedge and safe-haven dynamics in financial markets through the lens of nonlinear dynamics, offering significant practical implications for policymakers and investors.