Investing in cryptocurrency before and during the COVID-19 crisis: Hedge, diversifier or safe haven?

This paper examines the safe-haven, diversification, and hedging properties of cryptocurrencies against stock market declines. We use daily data for two sub-periods: pre-Covid-19 and during Covid-19. The sample includes the stock market indices of the 10 countries most affected by the pandemic and the eight most popular cryptocurrencies based on their market capitalization over the study period. We found that Bitcoin, Cardano, Ethereum, and Binance have generated portfolio diversification benefits for investors during the Covid-19 outbreak, while Tether and the USD Coin have acted as safe-haven assets. Additionally, the findings reveal that gold has been an effective diversification tool for investors during the Covid-19 pandemic, while West Texas Intermediate (WTI) crude oil has positively impacted stock index returns. Our results are of great practical interest to academics and policymakers, as well as investors, and provide relevant information on cryptocurrency variations during times of crisis.