Total and Net-Directional Connectedness of Cryptocurrencies During the Pre- and Post-COVID-19 Pandemic

Le Thanh Ha () and Nguyen Van Dai ()
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Le Thanh Ha: National Economics University, Vietnam
Nguyen Van Dai: National Economics University, Vietnam

Journal of International Commerce, Economics and Policy (JICEP), 2022, vol. 13, issue 01, 1-30

Abstract: This paper presents how volatility propagates through the cryptocurrency market. Our paper provides evidence for volatility connectedness on cryptocurrencies. The different econometric techniques, including the stochastic volatility (SVOL) model and time-varying parameter VAR models using a quasi-Bayesian local likelihood (QBLL), are applied to measure the volatility of the cryptocurrency market. Using high-frequency, intra-day data of the largest cryptocurrencies over 2018–2021, we detect the great volatility of the cryptocurrency market are the beginning of 2019, the beginning of 2020, and throughout the year of 2021. The total connectedness values suggest that the cryptocurrency market becomes volatile as the new strains of the COVID-19 appear at the end of 2021. However, by using directional connectedness, we reveal that there are negative and positive spillovers from a specific cryptocurrency to other cryptocurrencies. The great fluctuations in the period before the COVID-19 health crisis stem from the positive resonance (symmetric) between the volatility of each cryptocurrency, while this health crisis leads to substantially positive and negative spillovers (asymmetric) of cryptocurrencies, and this makes market volatility weaker than it actually is.

Keywords: Cryptocurrency; COVID-19 pandemic; volatility; connectedness; spillover (search for similar items in EconPapers)
JEL-codes: C18 C58 E58 F31 G15 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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DOI: 10.1142/S1793993322500041

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