COVID-19 Effects on the Relationship between Cryptocurrencies: Can It Be Contagion? Insights from Econophysics Approaches (original) (raw)
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The Contagion Effects of COVID-19 Pandemic on Cryptocurrencies
Humanities & Social Sciences Reviews
Purpose of the Study: In this research, the association between the COVID-19 pandemic and cryptocurrencies' price volatility has been examined. Methodology: To check the contagion effects of the COVID-19 pandemic on the price volatility of cryptocurrencies: BITCOIN, LITECOIN, XRP(RIPPLE), and ETHEREUM, the prices of all four are deployed from 10th August 2016 to 10th August 2020. The exponential generalized autoregressive conditional heteroscedastic (EGARCH) model is used to check the leverage effect exists or not. Stata 16 has been used to execute all the tests. Main Findings: The study's findings indicated that the leverage effect on the price volatility is present for LITECOIN, XRP(RIPPLE), and ETHEREUM but not for BITCOIN. Applications of the study: This study is significant for investors to develop strategies for investments and secure the transactions and control the creation of additional currency units. Also, it gives insight to the policy and decision-makers to arti...
The Effect of COVID-19 Transmission on Cryptocurrencies
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In recent years, Bitcoin and other cryptocurrencies like Ethereum and Dogecoin have emerged as important asset classes in general, and diversification and hedging instruments in particular. The recent COVID-19 pandemic has provided the chance to examine and assess cryptocurrencies’ behavior during extremely stressful times. The methodology of this study is based on an estimate using the ARDL model from 22 January 2020 to 12 March 2021, allowing us to analyze the long-term and short-term relationship between cryptocurrencies and COVID-19. Our results demonstrate that there is cointegration between the chosen cryptocurrencies in the market and COVID-19. The results indicate that Bitcoin, ETH, and DOGE prices were affected by COVID-19, which means that the pandemic seriously affected the three cryptocurrency prices.
Finance Research Letters, 2021
Elsevier has created a COVID-19 resource centre with free information in English and Mandarin on the novel coronavirus COVID-19. The COVID-19 resource centre is hosted on Elsevier Connect, the company's public news and information website. Elsevier hereby grants permission to make all its COVID-19-related research that is available on the COVID-19 resource centre-including this research content-immediately available in PubMed Central and other publicly funded repositories, such as the WHO COVID database with rights for unrestricted research re-use and analyses in any form or by any means with acknowledgement of the original source. These permissions are granted for free by Elsevier for as long as the COVID-19 resource centre remains active.
The Contagion Effects of the COVID-19 Pandemic: Evidence from Gold and Cryptocurrencies
SSRN Electronic Journal, 2020
At the beginning of the 2020 global COVID-2019 pandemic, Chinese financial markets acted as the epicentre of both physical and financial contagion. Our results indicate that a number of characteristics expected during a "flight to safety" were present during the period analysed. The volatility relationship between the main Chinese stock markets and Bitcoin evolved significantly during this period of enormous financial stress. We provide a number of observations as to why this situation occurred. Such dynamic correlations during periods of stress present further evidence to cautiously support the validity of the development of this new financial product within mainstream portfolio design through the diversification benefits provided.
The relationship between cryptocurrencies and COVID-19 pandemic
Eurasian Economic Review
We examine the relationship between cryptocurrencies (namely Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP)) and COVID-19 cases/deaths. This will help explore whether cryptocurrencies can serve as a hedge against COVID-19. The wavelet coherence analysis indicates that there is initially a negative relationship between Bitcoin and the number of reported cases and deaths; however, the relationship becomes positive during the later period. The findings for Ethereum and Ripple are also similar but with weaker interactions. This supports the hedging role of cryptocurrencies against the uncertainty raised by COVID-19.
The Impact of the COVID-19 Pandemic on the Volatility of Cryptocurrencies
International Journal of Financial Studies
This study aimed to investigate the interactions between Bitcoin to euro, gold, and STOXX50 during the period of COVID-19. First, a bibliometric analysis based on the R package was applied to highlight the research trends in the field during the period of the COVID-19 pandemic. While investigating the effects of the pandemic on Bitcoin, the number of cases of COVID-19 was used as a proxy. Using daily data for the period 1 March 2020 to 3 March 2020 and based on a vector autoregressive model, impulse response, and variance decomposition were utilized to analyze the dynamic relationships among the variables. The results revealed that the COVID-19 cases and gold hurt the exchange rate of Bitcoin to euro, while there was great volatility regarding the response of Bitcoin to a shock of STOXX50. The Granger causality test was constructed to investigate the relationships among the variables. The results show the presence of unidirectional causality running from new cases to STOXX50 and fro...
Impact of the COVID-19 Pandemic on Cryptocurrency Markets: A DCCA Analysis
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Extraordinary events, regardless of their financial or non-financial nature, are a great challenge for financial stability. This study examines the impact of one such occurrence—the COVID-19 pandemic—on cryptocurrency markets. A detrended cross-correlation analysis was performed to evaluate how the links between 16 cryptocurrencies were changed by this event. Cross-correlation coefficients that were calculated before and after the onset of the pandemic were compared, and the statistical significance of their variation was assessed. The analysis results show that the markets of the assessed cryptocurrencies became more integrated. There is also evidence to suggest that the pandemic crisis promoted contagion, mainly across short timescales (with a few exceptions of non-contagion across long timescales). We conclude that, in spite of the distinct characteristics of cryptocurrencies, those in our sample offered no protection against the financial turbulence provoked by the COVID-19 pand...
Applied Finance Letters, 2021
This paper investigates the relationship between the COVID-19 crisis and the two leading cryptocurrencies, Bitcoin and Ethereum, from 31 December 2019 to 18 August 2020. We also use an economic news sentiment index and financial market sentiment index to explore the possible mechanisms through which COVID-19 impacts cryptocurrency. We employ a VAR Granger Causality framework and Wavelet Coherence Analysis and find the cryptocurrency market was impacted in the early phase of the sample period through economic news and financial market sentiments, but this effect diminished after June 2020.
Cryptocurrency connectedness nexus the COVID-19 pandemic: evidence from time-frequency domains
Studies in Economics and Finance, 2021
Purpose-The purpose of this study is to investigate volatility connectedness between major cryptocurrencies by the virtue of market capitalization. In this context, this paper implements the frequency connectedness approach of Barunik and Krehlik (2018) and to measure short-, medium-and long-term connectedness between realized volatilities of cryptocurrencies. Additionally, this paper analyzes network graphs of directional TO/FROM spillovers before and after the announcement of the COVID-19 pandemic by the World Health Organization. Research limitations/implications-The study can be extended by including more cryptocurrencies and high-frequency data.
Ekonomický časopis
The purpose of this paper is to reinvestigate the properties of cryptocurrencies in the COVID-19 crisis as well as their co-movements with different asset classes including different stock markets, bonds, real estate, gold and oil. To capture the change in correlation caused by crisis, we employ multivariate GARCH Dynamic Conditional Correlation model. The findings suggest that cryptocurrencies can be seen no more than a diversifier for most of the assets. For real estate and S&P500 it is confirmed to be a weak hedge, while positive and upward sloping dynamic conditional correlations with gold obtained in COVID-19 period needs to be further investigated.