On Cryptocurrencies as an Independent Asset Class: Long-Horizon and COVID-19 Pandemic Era Decoupling from Global Sentiments
15 Pages Posted: 9 Dec 2020 Last revised: 12 Mar 2021
Date Written: March 8, 2021
We report new evidence that the cryptocurrency market behaves as an independent asset class based on high-dimensional stochastic-volatility commonality tests against a basket of global investor sentiment proxies. Our approach’s novelty resides in employment of appropriate sources of risk and uncertainty and two comprehensive indices (CRIX and VCRIX) that permit treating cryptocurrencies as a united pool from 2016 to 2020. Our consolidated findings suggest nugatory association between cryptocurrencies and global risk, risk aversion, and uncertainty. Further investigation of the COVID-19 pandemic period reinforces the long-horizon results.
Keywords: Cryptocurrency, Bitcoin, Ethereum, Litecoin, COVID-19, Coronavirus, Pandemic, Volatility Spillover, Stochastic Volatility, Correlation, Spillover
JEL Classification: C22, C50, G10
Suggested Citation: Suggested Citation