Determining the Appropriate Investment Strategy and Identify the Leading Monetary System before and during the Covid-19 Pandemic Crisis: A Case Study of Crypto-Currency, Gold Standard, and Fiat Money

Document Type : Int. Conf. on Synchronous Web-based Learning during COVID -19 Pandemic: A Survey on Library and Information Science Students of Bangladesh.


1 Assistant Prof., IIUM Institute of Islamic Banking & Finance (IIiBF), Kuala Lumpur, Malaysia.

2 IIUM Institute of Islamic Banking & Finance (IIiBF), Kuala Lumpur, Malaysia.

3 Associate Prof., IIUM Institute of Islamic Banking & Finance (IIiBF), Kuala Lumpur, Malaysia.


The study has two main objectives: firstly, to examine the opportunity of the Momentum and Contrarian investment strategy for three different monetary systems to trade currencies in Forex markets using Symlet wavelet decomposition approach. Secondly, to examine the co-movements between the three monetary systems using wavelet coherence analysis. The findings indicate that an investor with momentum strategy can consider investing in Bitcoin and Gold market, while the contrarian investment strategy is more advisable for the fiat money market during crisis period. Furthermore, the wavelet coherence analysis indicates that Bitcoin currency is the most leading monetary system during the Covid-19 pandemic crisis, followed by gold. However, US dollar mostly leads Bitcoin during non-crisis periods, while Gold is found to lead the US dollar throughout the sample period of the study. This suggests that the cryptocurrency system or gold standard should be considered as the alternative monetary system for better economic stability specially during the crisis period. Moreover, Bitcoin and gold had an anti-phase correlation before the Covid-19 pandemic crisis, which implies better benefits of hedging in the non-crisis period, while during a crisis they are moving together across different horizons. In contrast, Bitcoin and Fiat Money are strongly correlated during non-crisis periods, while during covide-19 pandemic crisis the correlation is statistically insignificant. Overall, the outcomes offer significant guidance for policymakers in understanding which monetary system leads to better economic stability during the crisis period and provides many implications for market players such hedging and Diversification investments strategy in forex markets.


Alareeni, B. (2018). Does corporate governance influence earnings management in listed companies in Bahrain Bourse? Journal of Asia Business Studies, 12(4), 551-570.
Ali, Q., Maamor, S., Yaacob, H. and Tariq Gill, M. U. (2018). Impact of Macroeconomic Variables on Islamic Banks Profitability, International Journal of Business Ethics and Governance, 1(2), pp. 20-35.
Al-Khazali, O., Elie, B., & Roubaud, D. (2018). The impact of positive and negative macroeconomic news surprises: Gold versus Bitcoin. Economics Bulletin, 38(1), 373-382.
Alqallaf, H. and Alareeni, B. (2018) “Evolving of Selected Integrated Reporting Capitals among Listed Bahraini Banks”, International Journal of Business Ethics and Governance, 1(1), 15-36.
Al-Yahyaee, K. H., Mensi, W., & Yoon, S. M. (2018). Efficiency, multifractality, and the long-memory property of the Bitcoin market: A comparative analysis with stock, currency, and gold markets. Finance Research Letters, 27, 228-234.
Andrieș, A.M. Ihnatov, I. Căpraru, B. and Tiwari, A.K., 2017. The relationship between exchange rates and interest rates in a small open emerging economy: The case of Romania. Economic Modelling, 67, pp. 261-274.
Balcilar, M., Bouri, E., Gupta, R., & Roubaud, D. (2017). Can volume predict Bitcoin returns and volatility? A quantiles-based approach. Economic Modelling, 64, 74-81.
Bampinas, G., & Panagiotidis, T. (2015). Are gold and silver a hedge against inflation? A two century perspective. International Review of Financial Analysis, 41, 267-276.
Bampinas, G., & Panagiotidis, T. (2015). On the relationship between oil and gold before and after financial crisis: linear, nonlinear and time-varying causality testing. Studies in Nonlinear Dynamics & Econometrics, 19(5), 657-668.
Bariviera, A.F. (2017). The inefficiency of Bitcoin revisited: A dynamic approach. Economics Letters, 161, 1-4.
Batten, J. A., Ciner, C., & Lucey, B. M. (2010). The macroeconomic determinants of volatility in precious metals markets. Resources Policy, 35(2), 65-71.
Baur, A. W., Bühler, J., Bick, M., & Bonorden, C. S. (2015, October). Cryptocurrencies as a disruption? empirical findings on user adoption and future potential of bitcoin and co. In Conference on e-Business, e-Services and e-Society (pp. 63-80). Springer, Cham.
Baur, D. G., & Lucey, B. M. (2010). Is gold a hedge or a safe haven? An analysis of stocks, bonds and gold. Financial Review, 45(2), 217-229.
Baur, D. G., Dimpfl, T., & Kuck, K. (2018). Bitcoin, gold and the US dollar–A replication and extension. Finance Research Letters, 25, 103-110.
Baur, D. G., Hong, K., & Lee, A. D. (2018). Bitcoin: Medium of exchange or speculative assets?. Journal of International Financial Markets, Institutions and Money, 54, 177-189.
Bautista, C.C., 2003. Interest rate-exchange rate dynamics in the Philippines: a DCC analysis. Applied Economics Letters, 10(2), pp.107-111.
Beckmann, J., & Czudaj, R. (2013). Gold as an inflation hedge in a time-varying coefficient framework. The North American Journal of Economics and Finance, 24, 208-222.
Bekiros, S., Boubaker, S., Nguyen, D. K., & Uddin, G. S. (2017). Black swan events and safe havens: The role of gold in globally integrated emerging markets. Journal of International Money and Finance, 73, 317-334.
Berghorn, W. (2015). Trend momentum. Quantitative Finance, 15(2), 261-284.
Black, F. (1976). The pricing of commodity contracts. Journal of financial economics, 3(1-2), 167-179.
Bloomfield, P. (2004). Fourier analysis of time series: an introduction. John Wiley & Sons.
Boero, G., Silvapulle, P., & Tursunalieva, A. (2011). Modelling the bivariate dependence structure of exchange rates before and after the introduction of the euro: a semi‐parametric approach. International Journal of Finance & Economics, 16(4), 357-374.
Böhme, R., Christin, N., Edelman, B., & Moore, T. (2015). Bitcoin: Economics, technology, and governance. Journal of economic Perspectives, 29(2), 213-38.
Bouoiyour, J., & Selmi, R. (2017). The Bitcoin price formation: Beyond the fundamental sources. arXiv, arXiv-1707.
Bouri, E., Azzi, G., & Dyhrberg, A. H. (2016). On the return-volatility relationship in the Bitcoin market around the price crash of 2013. Available at SSRN 2869855.
Bouri, E., Gupta, R., Lahiani, A., & Shahbaz, M. (2018). Testing for asymmetric nonlinear short-and long-run relationships between bitcoin, aggregate commodity and gold prices. Resources Policy, 57, 224-235.
Bouri, E., Gupta, R., Lau, C. K. M., Roubaud, D., & Wang, S. (2018). Bitcoin and global financial stress: A copula-based approach to dependence and causality in the quantiles. The Quarterly Review of Economics and Finance, 69, 297-307.
Bouri, E., Gupta, R., Tiwari, A. K., & Roubaud, D. (2017). Does Bitcoin hedge global uncertainty? Evidence from wavelet-based quantile-in-quantile regressions. Finance Research Letters, 23, 87-95.
Bouri, E., Molnár, P., Azzi, G., Roubaud, D., & Hagfors, L. I. (2017). On the hedge and safe haven properties of Bitcoin: Is it really more than a diversifier? Finance Research Letters, 20, 192-198.
Bouri, E., Naji Jalkh, Peter Molnár, and David Roubaud. "Bitcoin for energy commodities before and after the December 2013 crash: diversifier, hedge or safe haven?" Applied Economics 49, no. 50 (2017): 5063-5073.
Brandvold, M., Molnár, P., Vagstad, K., & Valstad, O. C. A. (2015). Price discovery on Bitcoin exchanges. Journal of International Financial Markets, Institutions and Money, 36, 18-35.
Bredin, D., Conlon, T., & Potì, V. (2015). Does gold glitter in the long run? Gold as a hedge and safe haven across time and investment horizon. International Review of Financial Analysis, 41, 320-328.
Caliskan, D., & Najand, M. (2016). Stock market returns and the price of gold. Journal of Asset Management, 17(1), 10-21.
Capie, F., Mills, T. C., & Wood, G. (2005). Gold as a hedge against the dollar. Journal of International Financial Markets, Institutions and Money, 15(4), 343-352.
Chan, L. K. C., Jegadeesh, N., & Lakonıshok, J. (1996). Momentum Strategies. The Journal of Finance, 51(5), 1681-1713.
Cheah, E. T., Mishra, T., Parhi, M., & Zhang, Z. (2018). Long memory interdependency and inefficiency in Bitcoin markets. Economics Letters, 167, 18-25.
Cheung, A., Roca, E., & Su, J. J. (2015). Crypto-currency bubbles: an application of the Phillips–Shi–Yu (2013) methodology on Mt. Gox bitcoin prices. Applied Economics, 47(23), 2348-2358.
Chinn, M., & Frankel, J. (2005). Will the euro eventually surpass the dollar as leading international reserve currency? (No. w11510). National Bureau of Economic Research.
Christie, A. A. (1982). The stochastic behavior of common stock variances: Value, leverage and interest rate effects. Journal of financial Economics, 10(4), 407-432.
Ciaian, P., Rajcaniova, M., & Kancs, D. A. (2016). The economics of BitCoin price formation. Applied Economics, 48(19), 1799-1815.
Ciner, C., Gurdgiev, C., & Lucey, B. M. (2013). Hedges and safe havens: An examination of stocks, bonds, gold, oil and exchange rates. International Review of Financial Analysis, 29, 202-211.
Corbet, S., Lucey, B., & Yarovaya, L. (2018). Datestamping the Bitcoin and Ethereum bubbles. Finance Research Letters, 26, 81-88.
Darmawan, I. (1992). Pengantar Uang dan Perbankan. Jakarta: PT Rineka Cipta.
Demir, E., Gozgor, G., Lau, C. K. M., & Vigne, S. A. (2018). Does economic policy uncertainty predict the Bitcoin returns? An empirical investigation. Finance Research Letters, 26, 145-149.
Dias, A., & Embrechts, P. (2010). Modeling exchange rate dependence dynamics at different time horizons. Journal of International Money and Finance, 29(8), 1687-1705.
Dwyer, G. P. (2015). The economics of Bitcoin and similar private digital currencies. Journal of Financial Stability, 17, 81-91.
Dyhrberg, A. H. (2016). Bitcoin, gold and the dollar–A GARCH volatility analysis. Finance Research Letters, 16, 85-92.
Dyhrberg, A. H. (2016). Hedging capabilities of bitcoin. Is it the virtual gold? Finance Research Letters, 16, 139-144.
Eichengreen, B. (2011). Exorbitant Privilege: The rise and fall of the Dollar and the Future of the International Monetary System. Oxford University Press.
Eisl, A., Gasser, S., & Weinmayer, K. (2015). Caveat emptor: Does Bitcoin improve portfolio diversification? Available at SSRN 2408997.
Engle, R. (2002). Dynamic conditional correlation: A simple class of multivariate generalized autoregressive conditional heteroskedasticity models. Journal of Business & Economic Statistics, 20(3), 339-350.
Erb, C. B., & Harvey, C. R. (2006). The strategic and tactical value of commodity futures. Financial Analysts Journal, 62(2), 69-97.
Feng, W., Wang, Y., & Zhang, Z. (2018). Informed trading in the Bitcoin market. Finance Research Letters, 26, 63-70.
Figuerola-Ferretti, Isabel, and Jesus Gonzalo. "Price discovery and hedging properties of gold and silver markets." Universidad Carlos III de Madrid Working Paper (2010): 1-17.
French, K. R., & Roll, R. (1986). Stock return variances: The arrival of information and the reaction of traders. Journal of financial economics, 17(1), 5-26.
Friedman, M. (1953). The methodology of positive economics. Essays in positive economics, 3(3), 145-178.
Ftiti, Z., Guesmi, K., & Abid, I. (2016). Oil price and stock market co-movement: What can we learn from time-scale approaches? International review of financial analysis, 46, 266-280.
Glaser, F., Zimmermann, K., Haferkorn, M., Weber, M. C., & Siering, M. (2014). Bitcoin-asset or currency? revealing users' hidden intentions. Revealing Users' Hidden Intentions (April 15, 2014). ECIS.
Goldberg, L. S., & Tille, C. (2006). The international role of the dollar and trade balance adjustment (No. w12495). National Bureau of Economic Research.
Gürgün, G., & Ünalmış, İ. (2014). Is gold a safe haven against equity market investment in emerging and developing countries? Finance Research Letters, 11(4), 341-348.
Hood, M., & Malik, F. (2013). Is gold the best hedge and a safe haven under changing stock market volatility? Review of Financial Economics, 22(2), 47-52.
Jammazi, R., Lahiani, A., & Nguyen, D. K. (2015). A wavelet based nonlinear ARDL model for assessing the exchange rate pass-through to crude oil prices. Journal of International Financial Markets, Institutions and Money, 34, 173-187.
Jegadeesh, N., & Titman, S. (1993). Returns to buying winners and selling losers: Implications for stock market efficiency. The Journal of finance, 48(1), 65-91.
Jegadeesh, N., & Titman, S. (1993). Returns to buying winners and selling losers: Implications for stock market efficiency. The Journal of finance, 48(1), 65-91.
Jiang, Y., Nie, H., & Ruan, W. (2018). Time-varying long-term memory in Bitcoin market. Finance Research Letters, 25, 280-284.
Joy, M. (2011). Gold and the US dollar: Hedge or haven? Finance Research Letters, 8(3), 120-131.
Joy, M. (2011). Gold and the US dollar: Hedge or haven? Finance Research Letters, 8(3), 120-131.
Kandır, S. Y., & Inan, H. (2011). Momentum yatirim stratejisinin karliliginin IMKB’de test edilmesi. BDDK Bankacilik ve Finansal Piyasalar, 5(2), 51-70.
Katsiampa, P. (2017). Volatility estimation for Bitcoin: A comparison of GARCH models. Economics Letters, 158, 3-6.
Kristjanpoller, W., & Bouri, E. (2019). Asymmetric multifractal cross-correlations between the main world currencies and the main cryptocurrencies. Physica A: Statistical Mechanics and its Applications, 523, 1057-1071.
Kristoufek, L., & Vosvrda, M. (2016). Gold, currencies and market efficiency. Physica A: Statistical Mechanics and its Applications, 449, 27-34.
Loaiza-Maya, R. A., Gómez-González, J. E., & Melo-Velandia, L. F. (2015). Exchange rate contagion in Latin America. Research in International Business and Finance, 34, 355-367.
Lucey, B. M., Sharma, S. S., & Vigne, S. A. (2017). Gold and inflation (s)–A time-varying relationship. Economic Modelling, 67, 88-101.
Luther, W. J., & Salter, A. W. (2017). Bitcoin and the bailout. The Quarterly Review of Economics and Finance, 66, 50-56.
Marinakis, Y. D. (1994). p-germanium links physical and dynamical phase transitions. Physica A: Statistical Mechanics and its Applications, 209(3-4), 301-308.
Marzo, M., & Zagaglia, P. (2010). Gold and the US Dollar: Tales from the turmoil. Available at SSRN 1598745.
Masih, M., Alzahrani, M., & Al-Titi, O. (2010). Systematic risk and time scales: New evidence from an application of wavelet approach to the emerging Gulf stock markets. International Review of Financial Analysis, 19(1), 10-18.
Merza Radhi, D. S. and Sarea, A. (2019). Evaluating Financial Performance of Saudi Listed Firms: Using Statistical Failure Prediction Models, International Journal of Business Ethics and Governance, 2(1), pp. 1-18.
Miffre, J., & Rallis, G. (2007). Momentum strategies in commodity futures markets. Journal of Banking & Finance, 31(6), 1863-1886.
Morlet, J., Arens, G., Fourgeau, E., & Glard, D. (1982). Wave propagation and sampling theory—Part I: Complex signal and scattering in multilayered media. Geophysics, 47(2), 203–221. doi:10.1190/1.1441328.
Nekhili, R., Altay-Salih, A., & Gençay, R. (2002). Exploring exchange rate returns at different time horizons. Physica A: Statistical Mechanics and its Applications, 313(3-4), 671-682.
Nikkinen, J., Pynnönen, S., Ranta, M., & Vähämaa, S. (2011). Cross‐dynamics of exchange rate expectations: a wavelet analysis. International Journal of Finance & Economics, 16(3), 205-217.
O'Connor, F. A., Lucey, B. M., Batten, J. A., & Baur, D. G. (2015). The financial economics of gold—A survey. International Review of Financial Analysis, 41, 186-205.
Pal, D., & Mitra, S. K. (2017). Time-frequency contained co-movement of crude oil and world food prices: A wavelet-based analysis. Energy Economics, 62, 230-239.
Patton, A. J. (2006). Modelling asymmetric exchange rate dependence. International economic review, 47(2), 527-556.
Pérez-Rodríguez, J. V. (2006). The euro and other major currencies floating against the US dollar. Atlantic Economic Journal, 34(4), 367-384.
Phillip, A., Chan, J. S., & Peiris, S. (2018). A new look at Cryptocurrencies. Economics Letters, 163, 6-9.
Plassaras, N. A. (2013). Regulating digital currencies: bringing Bitcoin within the reach of IMF. Chi. J. Int'l L., 14, 377.
Popper, N. (2015). Digital gold: The untold story of Bitcoin. Penguin UK.
Reboredo, J. C. (2013). Is gold a safe haven or a hedge for the US dollar? Implications for risk management. Journal of Banking & Finance, 37(8), 2665-2676.
Rogojanu, A., & Badea, L. (2014). The issue of competing currencies. Case study-Bitcoin. Theoretical & Applied Economics, 21(1).
Roueff, F., & Von Sachs, R. (2011). Locally stationary long memory estimation. Stochastic Processes and their Applications, 121(4), 813-844.
Rua, A., & Nunes, L. C. (2009). International comovement of stock market returns: A wavelet analysis. Journal of Empirical Finance, 16(4), 632-639.
Sánchez, M., 2008. The link between interest rates and exchange rates: do contractionary depreciations make a difference? International Economic Journal, 22(1), pp.43-61.
Selgin, G. (2015). Synthetic commodity money. Journal of Financial Stability, 17, 92-99.
Sjaastad, L. A. (2008). The price of gold and the exchange rates: Once again. Resources Policy, 33(2), 118-124.
Spargoli, F., & Zagaglia, P. (2008). The co-movements along the forward curve of natural gas futures: a structural view. Bank of Finland Research Discussion Paper, (26).
Tamakoshi, G., & Hamori, S. (2014). Co-movements among major European exchange rates: A multivariate time-varying asymmetric approach. International Review of Economics & Finance, 31, 105-113.
Taskinsoy, J. (2019). Pure Gold for Economic Freedom: A Supranational Medium of Exchange to End American Monetary Hegemony as the World’s Main Reserve Currency. Available at SSRN 3377904.
Torrence, C., & Webster, P. J. (1999). Interdecadal changes in the ENSO–monsoon system. Journal of climate, 12(8), 2679-2690.
Tovar, C. E., & Mohd Nor, T. (2018). Reserve currency blocs: a changing international monetary system?.
Tully, E., & Lucey, B. M. (2007). A power GARCH examination of the gold market. Research in International Business and Finance, 2s1(2), 316-325
Whelan, K. (2013). How is bitcoin different from the dollar. Forbes. URL: http://www. forbes. com/sites/karlwhelan.
Worthington, A. C., & Pahlavani, M. (2007). Gold investment as an inflationary hedge: Cointegration evidence with allowance for endogenous structural breaks. Applied Financial Economics Letters, 3(4), 259-262.
Xiaochuan, Z. (2009). Reform the international monetary system. BIS Review, 41, 2009.
Yang, L., Cai, X. J., & Hamori, S. (2017). Does the crude oil price influence the exchange rates of oil-importing and oil-exporting countries differently? A wavelet coherence analysis. International Review of Economics & Finance, 49, 536-547.
Yermack, D. (2013). Is Bitcoin a real currency? An economic appraisal (No. w19747). National Bureau of Economic Research, 2013.
Zagaglia, P., & Marzo, M. (2013). Gold and the US dollar: tales from the turmoil. Quantitative Finance, 13(4), 571-582.
Zagaglia, P., & Marzo, M. (2013). The Impact of the 2004 Reform of the Operational Framework of the ECB: Structural GARCH Evidence. Journal of Finance and Investment Analysis, 2(1), 1-8.