Capture the contagion network of bitcoin – Evidence from pre and mid COVID-19

Xiaochun Guo, Fengbin Lu and Yunjie Wei

Research in International Business and Finance, 2021, vol. 58, issue C

Abstract: COVID-19 is the first global scale crisis since the inception of Bitcoin. We compare the contagion phenomenon of Bitcoin and other financial markets or assets pre and during the COVID-19 shock in both contemporaneous and non-contemporaneous manner. This paper uses the directed acyclic graph (DAG), spillover index, and network topology to provide strong evidence on the directional contagion outcomes of Bitcoin and other assets. The empirical results show that the contagion effect between Bitcoin and developed markets is strengthened during the COVID-19 crisis. Particularly, European market has a dominant role. Excluding Bitcoin’s own shocks, United State and European markets are the main contagion sources to Bitcoin. European market also works as a intermediary to deliver infectious from United State and market fear. The findings show that gold always has contagion effect with Bitcoin, while gold, US dollar and bond market are the contagion receivers of Bitcoin under the shock of COVID-19. The empirical results further proved the safe haven, hedge and diversifier potential of Bitcoin in economic stable time, but also shows that the sustainability of these properties is undermined during the market turmoil.

Keywords: Bitcoin; COVID-19; Contagion; DAG; Financial market risk (search for similar items in EconPapers)
JEL-codes: G01 G15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:58:y:2021:i:c:s0275531921001057

DOI: 10.1016/j.ribaf.2021.101484

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