Is Tether a safe haven of safe haven amid COVID-19? An assessment against Bitcoin and oil using improved measures of risk.

Bitcoin is a new speculative investment with extremely volatile movement, thus possibly failing to act as a safe haven for crude oil when the price of this energy commodity plummeted following the global outbreak of COVID-19. Meanwhile, Tether is designed to behave similarly to the US dollar with stable fluctuation. In this study, we assessed their safe-haven properties in terms of risk reduction opportunities by proposing an improved version of Value-at-Risk (VaR) and Expected Shortfall (ES). Using vine copula-based AR-GJR-GARCH models, we demonstrated that Bitcoin exhibited inconsistent risk reduction capability for oil, particularly before COVID-19. When adding Tether into a portfolio containing oil and Bitcoin, the risk reduction was achieved for any portfolio allocation and was more pronounced amid the COVID-19 period. This suggests that Tether consistently served strong support for Bitcoin to protect oil investors against extreme risk and received a significant impact from the COVID-19 outbreak. However, the consistent safe-haven functionality of Tether was not as good as that of the US dollar in most cases, and this implied the vanishing of its stability. These results were robust when considering another asymmetric volatility model and another dependence model. Furthermore, the proposed improved VaR and ES forecasts outperformed their corresponding unimproved version in quantifying portfolio risk and therefore provided a more accurate assessment of safe-haven roles.