Impact of Covid-19 On tail risk dynamics for cryptocurrencies and traditional assets

João Pedro Franco () and Pedro Chaim ()
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João Pedro Franco: University of São Paulo (FEARP-USP)
Pedro Chaim: Universidade Federal de Santa Catarina

Economics Bulletin, 2025, vol. 45, issue 3, 1123 - 1133

Abstract: In this paper, we investigate the evolution of tail codependency and risk between the two largest cryptocurrencies (Bitcoin and Ethereum) and two traditional assets (Gold and the S&P500 index) before and after the Covid-19 pediod. Using a quantile regression framework, we compute the conditional tail risk (CoVaR) and $Delta$CovaR measures. Our results suggest that cryptocurrencies show increased shock transmission, systemic vulnerability, and risk spillovers in the post Covid-19 period. We also find that risk spillovers between Gold, the most recognizable safe haven in the literature, and cryptocurrencies, although still small, also increased after the pandemic. We believe that our study provides valuable information to help investors make better informed investment decisions and develop effective trading and diversification strategies.

Keywords: Cryptocurrencies; Bitcoin; Tail Risk; Systemic Risk (search for similar items in EconPapers)
JEL-codes: E5 G1 (search for similar items in EconPapers)
Date: 2025-09-30
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