COVID-19 pandemic and cryptocurrency markets: an empirical analysis from a linear and nonlinear causal relationship

Pradipta Kumar Sahoo

Studies in Economics and Finance, 2021, vol. 38, issue 2, 454-468

Abstract: Purpose - This paper aims to empirically examine the effect of Coronavirus disease 2019 (COVID-19) pandemic on cryptocurrency market returns with particular attention to top five cryptocurrencies and COVID-19 confirmed and death cases. Design/methodology/approach - The study applies the linear Toda and Yamamoto and nonlinear Diks and Panchenko Granger causality test to know the causal relationship of cryptocurrencies with COVID-19 pandemic. The study also uses the Narayan and Popp endogenous two structural break tests to capture the break period of the sample. Findings - The findings of the study confirm the existence of unidirectional causal relation from COVID-19 confirmed and death cases to cryptocurrency price returns. While examining the break periods, the post-break period result indicates the presence of unidirectional linear causality from COVID-19 confirmed cases to Bitcoin and Ethereum price returns. This shows that prior knowledge of COVID-19 pandemic growth helps to predict the return of cryptocurrencies. Originality/value - The study suggests the investors or crypto lovers to observe the growth of COVID-19 situations during their investment in cryptocurrency markets.

Keywords: COVID-19; Cryptocurrency; Nonlinear causality; Structural break; C58; E42; G11 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:sefpps:sef-09-2020-0385

DOI: 10.1108/SEF-09-2020-0385

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