Evaluating the Efficiency of Financial Assets as Hedges against Bitcoin Risk during the COVID-19 Pandemic

In the turbulent landscape of financial markets, Bitcoin has emerged as a significant focus for investors due to its highly volatile returns. However, risks and uncertainties associated with it necessitate effective hedging strategies. This paper explores potential various assets, including interest rates, stock commodities, exchange dynamic hedges against Bitcoin’s risk. Utilizing DCC-GARCH model, we construct model analyze viability these assets hedges. The data is categorized into pre-pandemic pandemic periods assess any change in performance outbreak COVID-19. Our empirical findings suggest that outperforms static OLS this context. During period, diverse set demonstrated enhanced efficiency risk compared phase. Among market indices, US dollar index, commodity futures displayed superior performance.