"Does Bitcoin Hedge Global Uncertainty?"

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http://www.up.ac.za/media/shared/61/WP/wp_2016_90.zp105924.pdf
>The main objective of this study was to examine whether Bitcoin can act as a hedge against global uncertainty...
>Specifically, we used a global measure of market uncertainty based on the common component, that is the first principal component of the VIXs of 14 developed and developing stock markets. Besides using raw returns, we used wavelets to decompose Bitcoin returns into its various frequencies, that is, investment horizons. The results from standard OLS regressions showed that uncertainty negatively affects raw Bitcoin returns, with the effect on raw returns emanating at longer investment horizons. Given the heavy tails of the variables, we next applied quantile methods that are more appropriate and useful to detect left and right tail dependence. Quantile regressions indicated that Bitcoin does act as a hedge against uncertainty, that is, it reacted positively to it at higher quantiles, especially at shorter investment horizons. Finally, when we used QQ regressions, we observed that hedging is observed at both lower and upper ends of Bitcoin returns and global uncertainty, but again primarily at shorter investment horizons. Our findings highlight the importance of not only decomposing Bitcoin returns into its various investment horizons but also, more importantly, the role of accommodating for estimation methods that incorporate information from quantiles for both Bitcoin returns and global uncertainty. Thus, unlike conditional-meanbased results, Bitcoin is shown to serve as a hedge against uncertainty at the extreme ends of the Bitcoin market and global uncertainty, but at shorter investment horizons. Therefore, short-horizon investment in Bitcoin can help investors hedge global equity market uncertainty, especially when the market is functioning in bear and bull regimes and also when uncertainty is either low or high.