Bitcoin’s Hedging Performance in the Wake of the Coronavirus Outbreak

In my recent study, I explored the dynamic correlation between Bitcoin and United States stocks during the COVID-19 outbreak, using a so-called difference-in-differences approach. Since the potential impact on the dynamic correlation between Bitcoin and U.S. stocks was unpredictable (and therefore uncertain), the study uses the COVID-19 outbreak as a quasi-experimental setting.

In doing so, the study uses the dynamic correlation between Bitcoin and U.S. stocks as a treatment group, whereas the dynamic correlation between gold and U.S. stocks serves as the control group. To sum up, the study employed the outbreak of the pandemic as a quasi-experimental design to investigate the hedging abilities of Bitcoin — which has been referred to as “digital gold” to highlight its renowned abilities to hedge risk investment for various financial asset classes in particular stocks.

Timeline of Bitcoin