Cryptocurrency as a Safe Haven for Investment Portfolios Amid COVID-19 Panic Cases of Bitcoin, Ethereum and Litecoin
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Date
2021
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
China Finance Review International
Abstract
Purpose – This article examines the susceptibility of cryptocurrencies to coronavirus disease 2019 (COVID-19) induced panic in comparison with major stock indices.
Design/methodology/approach – The author employs the Bayesian structural vector autoregression to examine the phenomenon in Bitcoin, Ethereum and Litecoin from 2nd January 2020 to 30th June 2021. A similar analysis is conducted for major stock indices, namely S&P 500, FTSE 100 and SSE Composite for comparison purposes.
Findings – The results suggest that cryptocurrencies returns suffered immensely in the early days of the COVID-19 outbreak following declarations of the disease as a global health emergency and eventually a pandemic in March 2020. However, the returns for all three cryptocurrencies recovered by April 2020 and remained resistant to further COVID-19 panic shocks. The results are dissimilar to those of S&P 500, FTSE 100
and SSE Composite values which were vulnerable to COVID-19 panic throughout the timeframe to June 2021. The results further reveal the strong predictive power of Bitcoin on the prices of other cryptocurrencies.
Research limitations/implications – The article provides evidence to support the cryptocurrency as a safe haven during the COVID-19 school of thought given their resistance to subsequent shocks during COVID-19. Thus, the author stresses the need for diversification of investment portfolios by including cryptocurrencies given their uniqueness and resistance to shocks during crises.
Originality/value – The author makes use of the novel coronavirus panic index to examine the magnitude of shocks in prices of cryptocurrencies during COVID-19.
Description
Keywords
Cryptocurrency, COVID-19, Stock markets, Bitcoin
Citation
Marobhe, M. I. (2021). Cryptocurrency as a safe haven for investment portfolios amid COVID-19 panic cases of Bitcoin, Ethereum and Litecoin. China Finance Review International.12(1) 51-68