Impact of the COVID-19 Pandemic on Cryptocurrency Markets: A DCCA Analysis

Dora Almeida (), Andreia Dionísio, Paulo Ferreira and Isabel Vieira ()
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Andreia Dionísio: CEFAGE, IIFA—Center for Advanced Studies in Management and Economics, University of Évora, 7004-516 Évora, Portugal

FinTech, 2023, vol. 2, issue 2, 1-17

Abstract: 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 pandemic, and thus, our study provided yet another example of ‘correlations breakdown’ in times of crisis.

Keywords: contagion; COVID-19; cryptocurrencies; detrended cross-correlation analysis; detrended cross-correlation analysis correlation coefficient; integration (search for similar items in EconPapers)
JEL-codes: C6 F3 G O3 (search for similar items in EconPapers)
Date: 2023
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