Any port in a storm: Cryptocurrency safe-havens during the COVID-19 pandemic

Econ Lett. 2020 Sep:194:109377. doi: 10.1016/j.econlet.2020.109377. Epub 2020 Jul 7.

Abstract

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 historiccrises.

Keywords: COVID-19; Cryptocurrency; Financial crisis; Pandemic; Safe-haven; Sentiment.