Bitcoin as a Panacea for the Venezuelan Crisis
Bitcoin as a Panacea for the Venezuelan Crisis

Author(s): Agata Kliber, Katarzyna Świerczyńska
Subject(s): National Economy, Economic history, Present Times (2010 - today), Financial Markets, ICT Information and Communications Technologies
Published by: Masarykova univerzita nakladatelství
Keywords: safe haven asset; Bitcoin; Venezuela; crisis; gold;
Summary/Abstract: The aim of the article is to verify which asset: gold, oil or bitcoin can be considered a safe-haven in a crisis-driven Venezuela. Our study covers the period 01.05.2014-31.07.2018, as in August 2018 Venezuela changed its currency to Bolivar Soberano. We estimate a threshold vector autoregression model for the returns of all the above-specified assets, where the threshold variable was the return of Venezuelan Stock Exchange General Index (IBC). We allow for three regimes: the extreme upward movements of the index (the hype), the moderate behavior, and the extreme downward changes (the crisis). We verify whether the relationships between the three pairs of assets (IBC and gold, IBC and oil, IBC and bitcoin) change depending on the regime. We also assume that the error term from the regression model follows a GARCH model. Our results suggest that both gold and oil could have been considered a safe-haven asset in a crisis-driven Venezuela, as the instruments changed in the opposite direction to the IBC when the extreme downward movements of the index have been observed. Additionally, their volatility was much smaller and uncorrelated with the volatility of the IBC. Eventually, our results suggest that investing in bitcoin has been considered by the investors as an alternative to investment not only in the moments of the extreme changes of the index, but also in its “moderate” regime.

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