The effect of COVID-19 pandemic on return-volume and return-volatility relationships in cryptocurrency markets

【Author】 Foroutan, Parisa; Lahmiri, Salim

【Source】CHAOS SOLITONS & FRACTALS

【影响因子】9.922

【Abstract】Understanding the dynamics of cryptocurrency markets during financial crises such as the recent one caused by the COVID-19 pandemic is crucial for policy makers and investors. In this study, the effect of COVID-19 pandemic on the return-volatility and return-volume relationships for the ten most traded cryptocurrencies, namely Tether, Bitcoin, Ethereum, Ripple, Litecoin, Bitcoin Cash, EOS, Chainlink, Cardano, and Monero is examined. Fur-ther, the behavior of cryptocurrencies during COVID-19 pandemic is compared with less volatile markets such as Gold, WTI, and BRENT crude oil markets. To study the effect of volatility on cryptocurrency return, an EGARCH-M model is employed while for the return-volume relationships the VAR model and Granger causality tests are uti-lized. Results show that the return-volatility relationships for Tether, Ethereum, Ripple, Bitcoin Cash, EOS, and Monero are significant during COVID-19 pandemic, while the same relationship is not significant prior to the pandemic for any of the studied cryptocurrencies. Our findings of the return-volume relationship support the availability of causal relations from return to trading volume changes for Chainlink and Monero in the pre-COVID-19 period and for Ethereum, Ripple, Litecoin, EOS, and Cardano during the COVID-19 period. However, considering the absolute values of returns, we found a significant relationship from cryptocurrencies' absolute returns to trading volume changes for both the prior and during COVID-19 periods. From a managerial perspec-tive, gold can be considered a suitable asset for portfolio hedging during the pandemic period and trading volume can help traders and investors identify the effect of momentum and potential trend in cryptocurrencies on their investments.

【Keywords】Cryptocurrency; Return-volume relationship; Return-volatility relationship; COVID-19 pandemic; Granger causality; EGARCH-M

【发表时间】2022 SEP

【收录时间】2022-09-06

【文献类型】实验仿真

【主题类别】

区块链治理-市场治理-数字货币