Cryptocurrencies are not immune to coronavirus: Evidence from investor fear

Lai T. Hoang and Dirk G. Baur

International Review of Economics & Finance, 2023, vol. 88, issue C, 1444-1463

Abstract: This paper examines the effects of fear of coronavirus on returns and volatility of five major cryptocurrencies during the COVID-19 outbreak. Adopting Google search volume on a comprehensive list of coronavirus-related terms to construct a gauge of fear, we show that daily innovations in coronavirus fear are associated with lower prices and higher volatility. The effects are driven by the extreme events and associated googling in March 2020. Out-of-sample tests further show a significant contribution of fear to forecasting next-day returns and volatility. The results indicate that (i) cryptocurrencies (particularly bitcoin) are not a safe haven for investors against the COVID-19 pandemic, and (ii) Google searches contain important information to explain cryptocurrency market movements during times of crisis.

Keywords: Cryptocurrencies; Bitcoin; Coronavirus; Pandemic; Google Trends (search for similar items in EconPapers)
JEL-codes: G01 G17 G23 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:88:y:2023:i:c:p:1444-1463

DOI: 10.1016/j.iref.2023.06.018

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