Are Bitcoin and Ethereum safe-havens for stocks during the COVID-19 pandemic?

 Using the WHO COVID-19 pandemic articulation, we test Bitcoin and Ethereum as places of refuge for stocks. We track down that the two biggest digital forms of money are reasonable as transient places of refuge. The DCC and cDCC results show that their every day returns will in general connect with S&P500 return contrarily during the pandemic. The relapse results additionally vigorously support the place of refuge includes and uncover that Ethereum is perhaps a preferable place of refuge over Bitcoin. Nonetheless, we note that the two coins show high volatilities. Previously (during) the pandemic every day volatilities of Bitcoin, Ethereum, gold, and the S&P500 are 3.44% (9.11%), 4.34% (10.96%), 0.89% (2.19%), and 1.27% (6.07%), separately. 

Catchphrases: Bitcoin, COVID-19, Ethereum, Pandemic, Safe-sanctuary 

1. Introduction 

On March 11, 2020, the World Health Organization (WHO) declares a disastrous pandemic status of Coronavirus illness of 2019 (COVID-19). As per the Chinese government official report to the WHO, the primary case was on December 8, 2019 (, 2020). As the pandemic focal point, China sends shocks to the monetary and non-monetary firms in G7 nations (Akhtaruzzaman et al., 2020) and even to brands conveying 'Crown' name like Corona brew (Corbet et al., 2020). The WHO declaration has sent monetary business sectors worldwide into spirals, because of the anticipated worldwide financial downturns in years to come. One day after the revelation, the S&P500, FTSE-100, Nikkei-225 all dive about 9.51%, 10.87%, and 4.41%. In a similar period, gold as a place of refuge (Baur and Lucey, 2010) likewise drops, however just about 3.53%. 

Prior to the digital currency time, a strand of writing has recorded the properties of place of refuge resources. For example, Baur and Lucey (2010) express that a resource is a place of refuge in case it is uncorrelated with stocks during a market decline. In this way, gold is viewed as a place of refuge during a super financial exchange slump. Sandoval and Franca (2012) additionally concur that resources that are uncorrelated with stocks are forthcoming places of refuge. The trademark is significant on the grounds that, during the huge monetary emergency, for example, 1987 (Black Monday), 1998 (Russian emergency), 2001 (The website bubble and 911), and 2008 (GFC), monetary business sectors will in general be exceptionally interrelated with each other. 

Since its origin, the cryptographic forms of money market has developed massively. As the pioneer, Bitcoin has expanded in esteem from almost $0 in October 2009 to more than $7000 in April 2020 (, 2020). Chan et al. (2019) express that the sensational Bitcoin cost expansion in December 2017 is crucial to decide its supporting capacities. As indicated by Bouri et al. (2017), a resource is a frail (solid) fence in case it is uncorrelated (contrarily corresponded) with another resource all things considered. A resource is a frail (solid) place of refuge in case it is uncorrelated (contrarily corresponded) with another resource during trouble times. 

Could Bitcoin be a place of refuge for stocks? Smales (2019) contends against this is a result of Bitcoin's high instability, illiquidity, and exchange cost. Chaim and Laurini (2019) likewise call attention to the possible air pocket in Bitcoin, but it is more plausible for the period before December 2017 (Geuder et al., 2019). During the COVID-19 market slump, Conlon and McGee (2020) express that Bitcoin is anything but a place of refuge since its value moves intimately with S&P500. Bitcoin isn't so much as a diversifier however an enhancer of infection (Corbet et al., 2020). 

Interestingly, Dyhrberg (2016) calls attention to the chance of utilizing Bitcoin as a supporting instrument. Bitcoin can even be a place of refuge, however its job relies upon the securities exchange types, time skylines, and speculation skylines (Bouri et al., 2017; Shahzad et al., 2020, 2019; Stensås et al., 2019). Gil-Alana et al. (2020) maintain that digital currencies are unique in relation to customary monetary and financial resources, and financial backers ought to incorporate them to differentiate their portfolios. Also, Bitcoin's place of refuge properties are shockingly better than gold and products (Bouri et al., 2020). 

The COVID-19 pandemic is the main worldwide wellbeing that converts into monetary shock since the GFC 2008 and Bitcoin's introduction in 2009. The occasion gives a foundation to research whether Bitcoin displays transient place of refuge highlights for stocks. We likewise examine Ethereum in light of the fact that the second-biggest digital money may likewise show place of refuge properties (Beneki et al., 2019; Bouri et al., 2020). We pick the US market since it is the biggest market, and incidentally, the US has the most noteworthy number of COVID-19 contaminations (to intermediary for the main misery) on the planet. In this examination, we utilize the term coins and digital currencies conversely. 

We track down that both Bitcoin and Ethereum are reasonable as transient places of refuge during the super financial exchange plunges. We additionally discover that Ethereum is conceivably a preferred place of refuge over Bitcoin during the pandemic. Nonetheless, we likewise uncover that previously and during the pandemic, Ethereum displays the most elevated every day return instability, trailed by Bitcoin, S&P500, and gold. 

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2. Data and system 

We gather the Bitcoin (BTC) and Ethereum (ETH) information from, while the S&P500 and gold spot costs information from DataStream. To control Bitcoin dividing's expected effect on May 12, 2020 (Crawley, 2020), we purposely use a transient perception window from July 1, 2019, until April 6, 2020. 

Following past investigations (see, for instance, Akhtaruzzaman et al., 2020; Bouri et al., 2017; Corbet et al., 2020), we use the DCC-GARCH approach (Engle, 2002) to analyze the unique connection of digital currency, gold, and S&P500. Bouri et al. (2017) propose that a frail (solid) place of refuge resource is uncorrelated (contrarily associated) with another resource during seasons of pressure. 

We select the mean condition dependent on the data criteria1 and track down that the MA (1) measure is the most appropriate particular for our DCC-GARCH (1,1) model, as introduced in Eq. (1). 



Though rt is a vector of Bitcoin, Ethereum, gold, and S&P500 every day returns, μt is the contingent mean vector of rt, and εt is the vector of residuals. In the interim, the fluctuation condition follows: 



Where ht is the restrictive fluctuation, c is the steady, α is the boundary that catches the short-run ingenuity or the ARCH impact, and b addresses the since quite a while ago run instability determination or the GARCH impact. 

The DCC-GARCH (1,1) condition is then given by Qt, which is the square certain authoritative framework as in Eq. (3). 



Where Qt is the time-fluctuating unqualified relationship framework of εt;  εt is a vector of normalized residuals from the initial step assessment of the GARCH (1,1) measure, and α and β are boundaries evaluating the impacts of past shocks and past DCCs on the flow DCC. To explore whether the relationships are dynamic, we play out the Wald test. The Wald test recommends that the relationships are in fact unique since α (at one percent) and β (at 10%) are genuinely not quite the same as nothing. Likewise, the amount of α and β is under unity.2 

The DCC between resources I and j is then determined as in Eq. (4): 



Following Aielli (2013), we additionally gauge the adjusted DCC (cDCC) and contrast the results and the DCC results as a vigor test. 

Subsequent to exploring the powerful connections, we additionally embrace the technique for Baur et al. (2018) and run OLS relapses with Newey-West hearty assessor, as introduced in Eq. (5). 



Where Coint is the digital currency (Bitcoin or Ethereum) return at day-t, Goldt is gold return at day-t, Stockt is stock return at day-t, and Covid19 is a spurious variable that approaches one if day-t is on the pandemic declaration date (March 11, 2020) or the ensuing days. On the off chance that the cryptographic money fills in as a place of refuge in the pandemic, the coefficient of β1 is relied upon to be positive, while the coefficient of β3 is negative (Baur et al., 2018). 

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3. Results and conversations 

In light of Table 1 , we discover that unpredictability grades to increment during the pandemic. Previously (during) the pandemic, the every day return standard deviations of Bitcoin, Ethereum, gold, and the S&P500 are 3.44% (9.11%), 4.34% (10.96%), 0.89% (2.19%), and 1.27% (6.07%), correspondingly. The expansion in instability is likewise noticeable from the return plot in Fig. 1 . All profits all through the pandemic are more unpredictable than before the pandemic. 

Table 1 

Enlightening measurements of Bitcoin (BTC), Ethereum (ETH), gold, and S&P500 day by day returns previously and during the COVID-19 pandemic. 

(A) Before COVID-19 pandemic 

(July 1, 2019-March 10, 2020) 

(B) During COVID-19 pandemic 

(Walk 11, 2020-April 6, 2020) 

Bitcoin Ethereum Gold S&P500 Bitcoin Ethereum Gold S&P500 

Mean −0.0027 −0.0023 0.0009 −0.00002 0.0062 −0.0052 0.0006 −0.0024 

Median −0.0041 −0.0032 0.0012 0.0009 0.0022 −0.0018 0.0025 −0.0151 

Maximum 0.1276 0.1384 0.0308 0.0493 0.1747 0.2076 0.0370 0.0938 

Minimum −0.1321 −0.1623 −0.0348 −0.0759 −0.2709 −0.3453 −0.0353 −0.1198 

Sexually transmitted disease. Dev. 0.0344 0.0434 0.0089 0.0127 0.0911 0.1096 0.0219 0.0607 

Observations 174 174 174 174 19 19 19 19 

Fig. 1 

Fig. 1 

The plot of every day gets back from July 1, 2019, until April 6, 2020. The ran line signifies the COVID-19 pandemic declaration (March 11, 2020). 

Table 2 shows that the pairwise connections among's gold and the two coins will in general increment during the pandemic. In the interim, the relationships between's the S&P500 and the two coins turn negative. The connection among's S&P500 and Bitcoin (Ethereum) is −0.3790 (−0.3757). These are the underlying signs that both digital currencies are likely places of refuge for stocks. To

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