CRYPTOCURRENCY RETURNS DURING COVID: Implications for Its Status as a Currency

ABSTRACT

To the extent that currency is a store of value, during times of uncertainty, its value could potentially be higher, providing holders a strategy to avoid capital losses on assets such as equities or bonds and to secure capital gains. The recent and ongoing COVID pandemic provides an opportunity to assess how crtypocurrency fares as a store of value, as the pandemic has disrupted economies, possibly inducing speculative motives for holding cryptocurrency. This paper sought to establish if Bitcoin and Ethereum generated any excess returns over the recent time period covering the pandemic. Parameter estimates from a Capital Asset Pricing Model revealed that neither Bitcoin nor Ethereum realized excess returns during the COVID pandemic. This suggests that to the extent that a standard and generally acceptable medium of exchange has a speculative component to its demand, crytopcurency such as Bitcoin and Ethereum may not be good candidates as a medium of exhhange. © 2022, Nigerian Economic Society. All rights reserved.