Any Port in a Storm: Cryptocurrency Safe-Havens during the COVID-19 Pandemic
13 Pages Posted: 27 May 2020
Date Written: May 25, 2020
Controlling for the polarity and subjectivity of social media data based on the development of the COVID-19 outbreak, we analyse the relationships between the largest cryptocurrencies and such time-varying realisation as to the scale of the economic shock centralised within the rapidly-escalating pandemic. We find evidence of significant growth in both returns and volumes traded, indicating that large cryptocurrencies acted as a store of value during this period of exceptional financial market stress. Further, cryptocurrency returns are found to be significantly influenced by negative sentiment relating to COVID-19. While not only providing diversification benefits for investors, results suggest that these digital assets acted as a safe-haven similar to that of precious metals during historic crises.
Keywords: COVID-19; Pandemic; Sentiment; Cryptocurrency; Safe-haven; Financial Crisis
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