Quantifying the Covid-19 Shock in Cryptocurrencies

Article  -  Monday, 22 July 2024

Fernandes, L.H.S.; Silva, J.W.L.; Araujo, F.H.A.; Bariviera, A.F. (2024): "Quantifying the Covid-19 Shock in Cryptocurrencies", Fractals

The COVID-19 pandemic had a profound impact on the global economy, and the cryptocurrency market was not immune to its effects. This study delves into the changes experienced by leading cryptocurrencies during this period, examining their volatility and correlation dynamics.

We analyzed daily volatility in price and volume for the top seven cryptocurrencies by means of the Multifractal Detrended Cross-Correlation (MF-DCCA). Our findings reveal a consistent multifractal behavior for these volatility pairs, indicating that their fluctuations exhibit a self-similar structure across different time scales. However, the multifractality observed for price volatility pairs was more pronounced, suggesting a higher degree of complexity and interconnectedness compared to volume volatility pairs.

We observed an increase in nonlinear cross-correlations between price volatility pairs, excluding the pair Bitcoin versus Dogecoin. This suggests that the price movements of these cryptocurrencies became more intertwined during the pandemic. On the other hand, we found that volume fluctuations of these cryptocurrencies became less correlated during this period.

These findings shed light on how the COVID-19 pandemic reshaped the dynamics of the cryptocurrency market. While price volatility pairs exhibited increased interconnectedness, volume volatility pairs experienced a decrease in correlation. The resilience of price attribute volatility time series suggests that investors may have sought refuge in cryptocurrencies during this uncertain time.

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