IS BITCOIN A HEDGE FOR CURRENCIES IN ASEAN-5?

Abstract

Bitcoin is a new asset class in the global financial system where it is known as cryptocurrency or digital currency. Bitcoin has begun to gain the world’s attention as the price of Bitcoin has been rising since 2009 as its usage increases day by day. The popularity of bitcoin has made some investors see it as a safe place. But is this true for the ASEAN-5 currencies? Therefore, this research paper aims to identify whether Bitcoin can act as a hedge for currencies in the ASEAN-5 countries namely Malaysia, Thailand, Indonesia, Singapore and the Philippines. This study uses daily data from December 1, 2014 until December 30, 2022. Empirical results of the study based on the GARCH (1,1) model show that Bitcoin can serve as a weak hedge for the ASEAN- 5 currencies except for Singapore where there is evidence of a strong hedge in the Lion City. This is particularly due to a unique Singapore's monetary policy tools which are based on their exchange rate unlike with other countries that mainly use interest rate as their tool.