Testing safe haven properties of digital and financial assets: wavelet coherence insights from G7 banking sector indices during crises

Abstract

This paper employs the wavelet coherence approach to examine the dynamic time-frequency relationships among Bitcoin, gold, gold-backed crypto assets (DGX and PAXG), and G7 banking sector indices during major global crises, including the COVID-19 outbreak, the 2022 Russia-Ukraine conflict, and the collapse of Silicon Valley Bank (SVB). Our analysis reveals that Bitcoin acts primarily as a short-term diversifier, with its safe-haven properties emerging strongly during the SVB collapse, while gold consistently provides robust safe-haven protection and long-term diversification, particularly for European banking stocks. DGX demonstrates diversifying behavior during the health and geopolitical crises and exhibits safe-haven characteristics during the SVB turmoil, whereas PAXG maintains a stable safe-haven role across all crises and functions as a long-term safe haven for American and Canadian banking indices. By integrating traditional and digital assets, this study advances the understanding of safe-haven mechanisms and offers practical guidance for investors and policymakers seeking portfolio protection and risk mitigation during periods of financial instability.