Enduring Relief or Fleeting Respite? Bitcoin as a Hedge and Safe Haven for the US Dollar

The hedging and safe haven properties of Bitcoin for the US dollar are investigated across a variety of investment horizons. Our findings reveal that (i) Bitcoin acts as a weak hedge for all currency pairs examined, with some evidence of negative average dependency for Euro, Swiss Franc and Japanese Yen rates, (ii) Bitcoin functions as a weak safe haven for the US dollar at short investment horizons, as indicated by a limited relationship during acute negative price movements, (iii) Bitcoin, instead of acting as a safe haven may, instead, increase aggregate risk at long horizons during periods of extreme losses. The analysis, performed using a series of horizon-dependent econometric tests for data including the COVID-19 crisis, provides evidence of some US dollar risk reduction benefits from Bitcoin, but limited potential for enduring relief from long-run extreme negative US dollar rate movements