Cryptocurrencies are Not Immune to Coronavirus: Evidence from Investor Fear
26 Pages Posted: 4 Feb 2021 Last revised: 6 Feb 2021
Date Written: February 3, 2021
This paper examines the predictability of fear of coronavirus on future returns and volatility of five major cryptocurrencies during the COVID-19 outbreak. Adopting Google search volume on a comprehensive list of coronavirus-related terms to construct a gauge of fear, we show that daily innovation in fear of coronavirus is associated with next-day negative returns and positive volatility. The results indicate that (i) cryptocurrencies (particularly bitcoin) are not a safe haven for investors against the COVID-19 pandemic, and (ii) Google search contains important information that might be useful to predict cryptocurrency market movements during times of crisis.
Keywords: cryptocurrencies, bitcoin, coronavirus, pandemic, Google Trends
JEL Classification: G01, G17, G23
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