Does Bitcoin hedge commodity uncertainty?

Khanh Hoang, Cuong C. Nguyen, Kongchheng Poch and Thang X. Nguyen

This paper examines the connectedness between Bitcoin and commodity volatilities, including oil, wheat, and corn, during the period Oct. 2013-Jun. 2018, using time- and frequency-domain frameworks. The time-domain framework's results show that the connectedness is 23.49%, indicating a low level of connection between Bitcoin and the commodity volatilities. Bitcoin contributes only 2.55% to the connectedness, while the wheat volatility index accounts for 12.51% of the total connectedness. The frequency connectedness shows that Bitcoin's contribution to the total connectedness increases from high-frequency to low-frequency bands, and the total connectedness reaches up to 22.47%. It also indicates that Bitcoin is the spillover transmitter to the wheat volatility, while being the spillover receiver from the oil and corn volatilities. The findings suggest that Bitcoin could be a hedger for commodity volatilities.

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Year of publication:	2020
Authors:	Hoang, Khanh ; Nguyen, Cuong ; Poch, Kongchheng ; Nguyen, Thang X.
Published in:	Journal of risk and financial management : JRFM. - Basel : MDPI, ISSN 1911-8074, ZDB-ID 2739117-6. - Vol. 13.2020, 6/119, p. 1-14
Subject:	Bitcoin \| commodity \| diversification \| hedging \| volatility spillover \| Hedging \| Volatilität \| Volatility \| Virtuelle Währung \| Virtual currency \| Rohstoffderivat \| Commodity derivative \| Portfolio-Management \| Portfolio selection \| Spillover-Effekt \| Spillover effect \| Warenbörse \| Commodity exchange \| Diversifikation \| Diversification \| Risiko \| Risk \| Rohstoffpreis \| Commodity price \| Rohstoffmarkt \| Commodity market \| ARCH-Modell \| ARCH model