Examining cryptocurrency versatility: Is it a currency or an investment asset?

Purpose The study aims to examine the role of cryptocurrency, specifically Bitcoin, as an asset and a currency. Design/methodology/approach The dynamic conditional correlation-generalised autoregressive conditional heteroskedasticity model was used to assess the role of Bitcoin as an asset. The study assesses the dynamic correlation between Bitcoin, bonds, Gold, the S&P 500 and crude oil in the extreme market events. A theoretical approach was used to evaluate Bitcoin on the functions of money. Findings The study found that cryptocurrency functions more like an asset, as it does not yet fulfil the role of money and still has a long way to go on this front. As an asset, cryptocurrency plays an effective role as a diversifier in the case of gold, as well as a weak safe hedge and a weak safe haven in the case of bonds. In the case of the S&P 500, Bitcoin plays the role of a diversifier, whereas it plays the role of a diversifier and a weak safe haven for crude oil investments. Practical implications We suggest that Bitcoin be included solely as a diversifier within a portfolio of traditional assets and that a cautious investment approach be adopted, considering its volatile nature. For regulators, we emphasise the necessity of promoting the innovative aspects of cryptocurrencies, particularly regarding cross-border transactions. Originality/value The study provides evidence about the dynamics of cryptocurrency markets, indicating that even after the pandemic, cryptocurrency acts mainly as a diversifier and does not yet perform the functions of money.