Emerging Stock Markets and COVID-19: Examining Cryptocurrencies as Safe Havens During the Crisis

Abstract

This study, Emerging Stock Markets and COVID-19: Examining Cryptocurrencies as Safe Havens During the Crisis, investigates the role of cryptocurrencies as safe haven assets during the COVID-19 pandemic in emerging stock markets. The global economic turmoil caused by the pandemic created unprecedented volatility in financial markets, prompting investors to seek refuge in alternative assets. Cryptocurrencies, with their perceived ability to hedge against traditional market fluctuations, gained attention as potential safe havens. Using a sample of emerging market economies, this study employs econometric models to analyze the relationship between cryptocurrency prices and stock market indices during the crisis period. The findings indicate that, in certain emerging markets, cryptocurrencies exhibited characteristics of a safe haven, with positive correlations observed during periods of heightened market volatility. However, the safe haven effect was not uniform across all markets, with differences attributable to factors such as market maturity, investor sentiment, and the level of adoption of digital assets. This research contributes to the understanding of cryptocurrencies’ potential to offer diversification and risk mitigation in emerging market portfolios during times of crisis, offering valuable insights for policymakers and investors.