How the Cryptocurrencies React to Covid-19 Pandemic? An Empirical Study Using DCC GARCH Model (2019–2021)

ABSTRACT

The paper aims to examine the dynamic conditional correlation between three major cryptocurrencies Bitcoin, Litecoin, and Ethereum, during the Covid-19 pandemic. Our sample includes two panels before/during Covid-19 covering the periods of 01/01/2019 to 12/31/2019 and from 01/01/2020 to 01/03/2021 using hourly data and the DCC GARCH model. The empirical results found that the Covid-19 pandemic positively impacts the cryptocurrencies prices starting from the second semester of 2020. Furthermore, these digital currencies became more vulnerable and showed a high level of volatility, especially Ethereum and Litecoin. Besides, we concluded that there was no significance on the short-run volatility effect during the Covid-19 period, which means the continuity of persistence in the long term. © 2022, The Author(s), under exclusive license to Springer Nature Switzerland AG.