Digital Assets as Safe Havens Portfolio Diversification Benefits Across Crisis and Post-COVID Periods

This study examines the evolving safe-haven properties and diversification benefits of digital assets across two distinct phases of global financial uncertainty: the COVID-19 crisis (January 2020–December 2021) and the post-COVID recovery period (January 2022–December 2023). Using GARCH (1,1) models and comparative volatility analysis, the research assesses the risk management performance of Bitcoin (BTC), Ethereum (ETH), and two leading stablecoins (USDC and USDT) under systemic stress. The findings reveal that while Bitcoin and Ethereum experienced high volatility persistence and limited hedging effectiveness during the crisis, stablecoins consistently provided low-variance characteristics, with USDC demonstrating remarkable resilience. Post-COVID results confirm a structural transition, as digital assets displayed improved volatility dynamics but continued to pose regulatory and systemic concerns. Unlike earlier studies that were restricted to the crisis period, this paper provides the first extended two-phase analysis, connecting empirical evidence to the global regulatory discourse, including debates on stablecoin oversight, systemic risk buffers, and financial stability frameworks. By integrating asset-level volatility outcomes with policy implications, the study contributes to understanding the dual role of digital assets as both high-risk diversifiers and potential regulatory instruments. The results provide valuable insights for investors, central banks, and policymakers in designing post-pandemic financial resilience strategies.