Abstract
PurposeThis paper aims to find, which of the assets: gold, oil or bitcoin can be considered a safe-haven for investors in a crisis-driven Venezuela. The authors look also at the governmental change of approach towards the use and mining of cryptocurrencies being one of the assets and potential applications of bitcoin as (quasi) money.Design/methodology/approachThe authors collected the daily data (a period from 01 May 2014 to 31 July 2018) on the development of the following magnitudes: Caracas Stock Exchange main index: Índice Bursátil de Capitalisación (IBC) index; gold price in US dollars, the oil price in US dollars and Bitcoin price in bolivar fuerte (VEF) (LocalBitcoins). The authors estimated a threshold VAR model between IBC and each of the possible safe-haven assets, where the trigger variable was the IBC; then the authors modelled the residuals from the TVAR model using MGARCH model with dynamic conditional correlation.FindingsThe results show that that gold is a better safe-haven than oil for Venezuelan investors, while bitcoin can be considered a weak safe haven. Still, bitcoin can perform (to a certain extent) money functions in a crisis-driven country.Research limitations/implicationsFurther research after the change of local currency from VEF into bolivar soberano might be looked at on the later stage.Practical implicationsThe authors provide evidence on which of analysed asset is the best safe-haven for the investors acting in the time of the crisis. The evidence goes in line with other authors’ findings, thus, the results might bring implications for investors of more universal character. Additionally, the result might be helpful for governments and/or monetary authorities while projecting institutional frameworks and conducting monetary policy.Social implicationsThe unprecedented economic crisis in Venezuela was one of the factors that fuelled the mining and use of cryptocurrencies in the daily life of its citizens. Nowadays, the country is a leader in terms of the use of bitcoin and other cryptocurrencies in Latin America. The results show a potential application of bitcoin as a store of value or even means of payments in Venezuelan (or in other countries affected by the crisis).Originality/valueThe paper builds on the original data set collected by the authors and brings evidence from the models the authors constructed to verify, which asset is the best option for investors in hard times of the crisis. The authors add to the existing literature on financial assets, cryptocurrencies and behaviour of investors under different economic conditions.
Highlights
Venezuela has been facing the effects of a crisis on an unprecedented scale
The results show that that gold is a better safe-haven than oil for Venezuelan investors, while bitcoin can be considered a weak safe haven
The results show a potential application of bitcoin as a store of value or even means of payments in Venezuelan
Summary
The country is trying to respond to the humanitarian crisis and to mitigate the risks for investors present on the Caracas Stock Exchange (Bolsa de Valores de Caracas). These investors have several options for allocating their capital. We allowed for three regimes, separating periods of extreme upward and downward movement of the index, as well as its “moderate” behaviour In this way, we can analyse whether the relationships between the Caracas Stock Exchange main index (further, namely Índice Bursátil de Capitalisacion (IBC) index) and the safe-haven candidates vary in different market conditions. Our study covers daily data between 2014 and 2018, as in August 2018, Venezuela changed its currency from bolivar fuerte (VEF) to bolivar soberano (VES)
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