Co-movement of bitcoin, gold, USD, oil and VIX: evidence of wavelet coherence and DCC-GARCH from the pandemic period

Abstract

This study examines the relations of Bitcoin (BTC) prices and fluctuations with gold, USD, oil, VIX index, hedging, and diversification features in Turkiye. For this purpose, wavelet coherence and dynamic conditional correlations (DCCs) were used in the study. Our research explores whether the bubble behavior patterns in BTC prices during the COVID-19 pandemic can be used in the short term to protect against the bubble behavior in the markets that are the subject of this research and vice versa. However, whether other assets can be used to manage and hedge BTC's downside risk is also being explored. The aim is to understand how and at what level critical financial instruments and indicators are affected by each other in times of crisis and economic recession, such as pandemics, and to present valuable results to decision-makers. The sample for this study includes Turkiye for the period between 12/31/2019 and 13/07/2022. Wavelet Coherence and DCC-GARCH results indicate significant positive and negative movements of BTC prices with gold, oil, USD prices, and the VIX fear index during the pandemic. We find evidence of volatility persistence, causality, and phase differences between BTC and other financial instruments and indicators.

Keywords

• btc
• gold
• usd
• oil
• vix
• wavelet coherence