Exploring the relationship between cryptocurrencies and hedge funds during COVID-19 crisis

Soumaya Ben Khelifa, Khaled Guesmi and Christian Urom

International Review of Financial Analysis, 2021, vol. 76, issue C

Abstract: In this paper, we investigated the relationship between cryptocurrency market and hedge funds in two different ways. First, we focus on the dependence between Cryptocurrency hedge funds and conventional hedge funds strategies using VAR and VECM models, while analyzing the impact of COVID-19 on the hedge funds' values. Secondly, we choose between ARDL and ARDL-ECM models to study the effects of cryptocurrency price changes on Crypto- Currency hedge funds' values during COVID-19 crisis. Our empirical findings demonstrate that there is substantial interactions between Crypto-Currency and conventional hedge funds. The COVID-19 pandemic has significant negative impact on the performance of the following hedge funds: Event Driven, Relative Value and Distressed Debt fund strategies, this has reflected in a significant drop in their values during this critical period. However, we demonstrate that COVID-19 pandemic did not affect the relationship between crypto-currency hedge funds and both bitcoin and Ethereum. These findings hold profound implications for hedge funds managers, cryptocurrency market main players and policy makers. Our study is crucial in forecasting the performance of these markets especially during global pandemics.

Keywords: Hedge funds; Cryptocurrencies; VECM model; ARDL model; COVID-19; Causality (search for similar items in EconPapers)
JEL-codes: F37 O16 Q40 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:76:y:2021:i:c:s1057521921001186

DOI: 10.1016/j.irfa.2021.101777

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