Can gold-backed cryptocurrencies have dynamic hedging and safe-haven abilities against DeFi and NFT assets?

Connectedness Between Gold-Backed Cryptocurrencies and the G7 Stock Market Indices During Global Crises: Evidence From the Quantile Vector Autoregression Approach

“…Our findings contradict those of Jalan et al (2021), Widjaja et al (2023), and Kołodziejczyk (2023) who suggest that gold-backed crypto assets are not as reliable as real gold in fulfilling the role of a safe-haven asset, and that they may be vulnerable to volatility transmitted from gold markets. However, our results are in line with those of Ali et al (2022), Syuhada et al (2022), Trichilli and Boujelbéne (2023), Ali et al (2024), Maouchi et al (2024), andBelguith et al (2024) who support the safe haven ability of gold-backed cryptocurrencies.…”

“…Based on the findings of Wang et al (2022) and Rizvi et al (2022), the presence of a negative value indicates not only the asset's reception of shocks but also its function as a hedging mechanism and a safe haven during periods of crises. From this figure, we can see that the values of the four gold-backed cryptocurrencies remains negative throughout the entire period, suggesting their safe haven roles during the three crises (Ali et al, 2022(Ali et al, , 2024Belguith et al, 2024;Conlon et al, 2020;Díaz et al, 2023;Maouchi et al, 2024;Syuhada et al, 2022;Trichilli & Boujelbéne, 2023;Wang et al, 2020).…”

“…They find that investors within these countries might reduce the risk associated with their Islamic stock portfolios by including Islamic gold-backed crypto assets. Belguith et al (2024) investigate the diversifying, hedging, and safe haven abilities of gold-backed cryptocurrencies against NFT and DeFi tokens. They reveal that goldbacked cryptocurrencies are hedging and diversifying instruments during times of stability and strong safe havens during periods of turmoil.…”

“…Several studies have investigated its safe haven feature within the framework of Islamic equity markets (Ali et al, 2022(Ali et al, , 2024Yousaf & Yarovaya, 2022) or conventional stock markets (Feng et al, 2024;Trichilli & Boujelbéne, 2023). Another line of analysis on gold-backed cryptocurrencies examines their interaction with conventional cryptocurrencies (such as Bitcoin) and their usage as a safe haven against volatility in these digital markets (Ante et al, 2021;Baur & Hoang, 2020;Belguith et al, 2024;Díaz et al, 2023;Maouchi et al, 2024;Wang et al, 2020). However, no previous research has given particular interest to the safe haven ability of gold-backed cryptocurrencies against the G7 stock market indices, especially during periods of global crises.…”

“…The connectedness between gold-backed cryptocurrencies and the G7 stock market indices during global crises can be economically rationalized through the safe haven properties of gold-backed cryptocurrencies. In fact, these digital gold assets, like traditional gold, may be regarded as safe-haven investments during crises given their proven ability to store value when conventional markets are volatile and investors often seek refuge in these assets as a hedge against uncertainties and volatilities (Ali et al, 2022;Belguith et al, 2024;Díaz et al, 2022Díaz et al, , 2023Díaz et al, , 2023Maouchi et al, 2024;Trichilli & Boujelbéne, 2023;Wang et al, 2020). During high market stress, investors usually display flight-to-quality behavior, redirecting their portfolios to more secure assets.…”