Transitions in the cryptocurrency market during the COVID-19 pandemic: A network analysis

• Published in: Finance research letters Vol. 43; p. 101981
• Main Author: Vidal-Tomás, David
• Format: Journal Article
• Language: English
• Published: Netherlands Elsevier Inc 01.11.2021
• Subjects: COVID-19; Cryptocurrencies; Diversification; Efficiency; Herding; Network; COVID-19; Cryptocurrencies; G40; Efficiency; Network; G10; G01; Herding; Diversification
• ISSN: 1544-6123; 1544-6131; 1544-6131
• DOI: 10.1016/j.frl.2021.101981

•We analyse the market transitions of the cryptocurrency market during the COVID-19 pandemic.•We use a network analysis by means of the winner-takes-all approach.•The cryptocurrency market was affected by COVID-19 on 12 March 2020.•Since April 2020, the market has progressively recovered to its initial state.•The market transitions could be related to recent findings regarding efficiency, herding, and diversification. In this letter, we identify the transitions of the cryptocurrency market during the pandemic by means of a network analysis. This method allows us to observe that COVID-19 significantly affected cryptocurrencies during a short period of financial panic, from 12 March 2020 to 1 April 2020, giving rise to a remarkable increase of market synchronisation. However, since April 2020, the cryptocurrency market progressively recovered its initial state, since the strong synchronisation, observed as a consequence of COVID-19, continuously disappeared. Therefore, our analysis highlights different market phases, which can be related to some of the phenomena reported in the existing literature.