Safe haven or risky hazard? Bitcoin during the Covid-19 bear market

TLDR

The Covid‑19 bear market marks the first major market losses since Bitcoin began active trading. The study tests Bitcoin’s claimed safe‑haven properties during this downturn. Bitcoin does not act as a safe haven, falling in tandem with the S&P 500, and even a small Bitcoin allocation raises portfolio downside risk, undermining its role as shelter from market turbulence.

Abstract

The Covid-19 bear market presents the first acute market losses since active trading of Bitcoin began. This market downturn provides a timely test of the frequently expounded safe haven properties of Bitcoin. In this paper, we show that Bitcoin does not act as a safe haven, instead decreasing in price in lockstep with the S&P 500 as the crisis develops. When held alongside the S&P 500, even a small allocation to Bitcoin substantially increases portfolio downside risk. Our empirical findings cast doubt on the ability of Bitcoin to provide shelter from turbulence in traditional markets.