Cryptocurrency liquidity and volatility interrelationships during the COVID-19 pandemic

Corbet, Shaen; Hou, Yang; Hu, Yang; Larkin, Charles; Lucey, Brian M.; Oxley, Les

doi:10.1016/j.frl.2021.102137

Cited by 77 publications

(52 citation statements)

References 22 publications

(18 reference statements)

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“…The results surprisingly revealed that COVID-19 has a positive impact on the market efficiency of major cryptocurrencies namely Bitcoin, Ethereum, Litecoin, Binance and Ripple. These findings seem to be supported by those of Corbet et al (2021) that showed increase in cryptocurrency market liquidity after World Health Organization's declaration of COVID-19 as a pandemic in March 2020. Their findings put arguments in favor of cryptocurrencies as investment safe havens during major crises.…”

Section: Cryptocurrencies During the Covid-19 Pandemicsupporting

confidence: 62%

“…The results of this study have tremendous theoretical and policy implications. First, they provide evidence to support the cryptocurrency as a safe haven during COVID-19 hypothesis which is also advocated by Corbet et al (2021); Iqbal et al (2021) and Yousaf et al (2021). This is paramount for cryptocurrency theories development as empirical literature has been divided on the subject due to application of different approaches to examine the phenomenon.…”

Section: Discussionmentioning

confidence: 80%

“…This appears to support the findings by Demir et al (2020) which indicate that returns for cryptocurrencies suffered immensely in the early days of crisis but quickly recovered and posted positive returns in the later periods. This also explains the increase in market liquidity in March 2020 after WHO's declaration of COVID-19 as a pandemic as the cryptocurrencies already recovered from the initial shock in January (Corbet et al, 2021).…”

Section: Cryptocurrency and Covid-19mentioning

confidence: 94%

“…The review of recent literature on the impact of COVID-19 pandemic on the volatility of cryptocurrencies' prices reveals disparities among the findings from different studies. The first group of studies such as Mnif et al (2020), Corbet et al (2021), Iqbal et al (2021) and Yousaf et al (2021) show that cryptocurrencies have generally been stable and exhibited some positive returns during COVID-19 thus been considered a safe haven. This has also been supported by Vidal-Tom as (2021) who showed recovery and stability of cryptocurrencies since the first wave of COVID-19 which peaked in March 2020.…”

Section: Research Gapmentioning

confidence: 99%

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Cryptocurrency as a safe haven for investment portfolios amid COVID-19 panic cases of Bitcoin, Ethereum and Litecoin

Marobhe

2021

CFRI

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PurposeThis article examines the susceptibility of cryptocurrencies to coronavirus disease 2019 (COVID-19) induced panic in comparison with major stock indices.Design/methodology/approachThe author employs the Bayesian structural vector autoregression to examine the phenomenon in Bitcoin, Ethereum and Litecoin from 2nd January 2020 to 30th June 2021. A similar analysis is conducted for major stock indices, namely S&P 500, FTSE 100 and SSE Composite for comparison purposes.FindingsThe results suggest that cryptocurrencies returns suffered immensely in the early days of the COVID-19 outbreak following declarations of the disease as a global health emergency and eventually a pandemic in March 2020. However, the returns for all three cryptocurrencies recovered by April 2020 and remained resistant to further COVID-19 panic shocks. The results are dissimilar to those of S&P 500, FTSE 100 and SSE Composite values which were vulnerable to COVID-19 panic throughout the timeframe to June 2021. The results further reveal strong predictive power of Bitcoin on prices of other cryptocurrencies.Research limitations/implicationsThe article provides evidence to support the cryptocurrency as a safe haven during COVID-19 school of thought given their resistance to subsequent shocks during COVID-19. Thus, the author stresses the need for diversification of investment portfolios by including cryptocurrencies given their uniqueness and resistance to shocks during crises.Originality/valueThe author makes use of the novel corona virus panic index to examine the magnitude of shocks in prices of cryptocurrencies during COVID-19.

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Section: Cryptocurrencies During the Covid-19 Pandemicsupporting

confidence: 62%

Section: Discussionmentioning

confidence: 80%

Section: Cryptocurrency and Covid-19mentioning

confidence: 94%

Section: Research Gapmentioning

confidence: 99%

See 2 more Smart Citations

Cryptocurrency as a safe haven for investment portfolios amid COVID-19 panic cases of Bitcoin, Ethereum and Litecoin

Marobhe

2021

CFRI

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“…Cryptocurrencies have presented many periods of pronounced price volatility during their rapid growth and development. There is evidence to suggest that cryptocurrencies played a new role as potential safe-haven currencies during periods of substantial financial market stress (Corbet et al 2021).…”

Section: Introductionmentioning

confidence: 99%

The Accuracy of Risk Measurement Models on Bitcoin Market during COVID-19 Pandemic

Likitratcharoen

Kronprasert

Wiwattanalamphong

et al. 2021

Risks

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Since late 2019, during one of the largest pandemics in history, COVID-19, global economic recession has continued. Therefore, investors seek an alternative investment that generates profits during this financially risky situation. Cryptocurrency, such as Bitcoin, has become a new currency tool for speculators and investors, and it is expected to be used in future exchanges. Therefore, this paper uses a Value at Risk (VaR) model to measure the risk of investment in Bitcoin. In this paper, we showed the results of the predicted daily loss of investment by using the historical simulation VaR model, the delta-normal VaR model, and the Monte Carlo simulation VaR model with the confidence levels of 99%, 95%, and 90%. This paper displayed backtesting methods to investigate the accuracy of VaR models, which consisted of the Kupiec’s POF and the Kupiec’s TUFF statistical testing results. Finally, Christoffersen’s independence test and Christoffersen’s interval forecasts evaluation showed effectiveness in the predictions for the robustness of VaR models for each confidence level.

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The isotropy of cryptocurrency volatility

Hairudin

Mohamad

2023

Int. J Fin Econ

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We examine the fractal volatility and long‐range dependence of Bitcoin, Ethereum, Tether and USD Coin by employing the continuous wavelet transform, maximal overlap discrete wavelet transform and rescaled range. Our dataset consists of daily prices spanning from January 2017 through to October 2022, encapsulating pre‐ and post‐epidemic eras. Generally, our findings suggest that Tether presents the least overall volatility throughout the time‐frequency spectrum. USD Coin demonstrates ephemeral turbulence, contrary to Tether's maturity in influencing market equilibrium through token issuance and trade responses. In the post‐epidemic sample, both stablecoins indicate mean reversion, with USD Coin showing marginally better efficiency. Conversely, investment tokens display persistent clusters due to retail traders and long‐term fundamental institutions. Although both tokens illustrate multifractal volatility, Ethereum unveils more essence of self‐similarity than Bitcoin. Hence, there is no evidence that Ethereum truly duplicates Bitcoin since policy‐related events differ between them, as both return series move incongruously. Conditional dynamics signify that all cryptocurrencies, except Tether, were affected by the pandemic transition of COVID‐19 and subsequent macroeconomic news. The unconditional volatility of stablecoins evinces zero‐mean errors, antithetical to investment tokens exhibiting annual cycles. The fractal geometry suggests that investment tokens simulate one‐dimensional lines, whereas stablecoins mimic two‐dimensional planes.

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Cryptocurrency liquidity and volatility interrelationships during the COVID-19 pandemic

Cited by 77 publications

References 22 publications

Cryptocurrency as a safe haven for investment portfolios amid COVID-19 panic cases of Bitcoin, Ethereum and Litecoin

Cryptocurrency as a safe haven for investment portfolios amid COVID-19 panic cases of Bitcoin, Ethereum and Litecoin

The Accuracy of Risk Measurement Models on Bitcoin Market during COVID-19 Pandemic

The isotropy of cryptocurrency volatility

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