COVID-19 Effects on the Relationship between Cryptocurrencies: Can It Be Contagion? Insights from Econophysics Approaches
Cryptocurrencies are relatively new and innovative financial assets. They are a topic of interest to investors and academics due to their distinctive features. Whether financial or not, extraordinary events are one of the biggest challenges facing financial markets. The onset of the COVID-19 pandemi...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2023-01-01
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| Series: | Entropy |
| Subjects: | |
| Online Access: | https://www.mdpi.com/1099-4300/25/1/98 |
| _version_ | 1827626191143567360 |
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| author | Dora Almeida Andreia Dionísio Isabel Vieira Paulo Ferreira |
| author_facet | Dora Almeida Andreia Dionísio Isabel Vieira Paulo Ferreira |
| author_sort | Dora Almeida |
| collection | DOAJ |
| description | Cryptocurrencies are relatively new and innovative financial assets. They are a topic of interest to investors and academics due to their distinctive features. Whether financial or not, extraordinary events are one of the biggest challenges facing financial markets. The onset of the COVID-19 pandemic crisis, considered by some authors a “black swan”, is one of these events. In this study, we assess integration and contagion in the cryptocurrency market in the COVID-19 pandemic context, using two entropy-based measures: mutual information and transfer entropy. Both methodologies reveal that cryptocurrencies exhibit mixed levels of integration before and after the onset of the pandemic. Cryptocurrencies displaying higher integration before the event experienced a decline in such link after the world became aware of the first cases of pneumonia in Wuhan city. In what concerns contagion, mutual information provided evidence of its presence solely for the Huobi Token, and the transfer entropy analysis pointed out Tether and Huobi Token as its main source. As both analyses indicate no contagion from the pandemic turmoil to these financial assets, cryptocurrencies may be good investment options in case of real global shocks, such as the one provoked by the COVID-19 outbreak. |
| first_indexed | 2024-03-09T12:49:23Z |
| format | Article |
| id | doaj.art-c6b292bfccdc45d297a773aef6903710 |
| institution | Directory Open Access Journal |
| issn | 1099-4300 |
| language | English |
| last_indexed | 2024-03-09T12:49:23Z |
| publishDate | 2023-01-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Entropy |
| spelling | doaj.art-c6b292bfccdc45d297a773aef69037102023-11-30T22:08:37ZengMDPI AGEntropy1099-43002023-01-012519810.3390/e25010098COVID-19 Effects on the Relationship between Cryptocurrencies: Can It Be Contagion? Insights from Econophysics ApproachesDora Almeida0Andreia Dionísio1Isabel Vieira2Paulo Ferreira3CEFAGE, IIFA—Center for Advanced Studies in Management and Economics, University of Évora, Largo dos Colegiais 2, 7004-516 Évora, PortugalCEFAGE, IIFA—Center for Advanced Studies in Management and Economics, University of Évora, Largo dos Colegiais 2, 7004-516 Évora, PortugalCEFAGE, IIFA—Center for Advanced Studies in Management and Economics, University of Évora, Largo dos Colegiais 2, 7004-516 Évora, PortugalCEFAGE, IIFA—Center for Advanced Studies in Management and Economics, University of Évora, Largo dos Colegiais 2, 7004-516 Évora, PortugalCryptocurrencies are relatively new and innovative financial assets. They are a topic of interest to investors and academics due to their distinctive features. Whether financial or not, extraordinary events are one of the biggest challenges facing financial markets. The onset of the COVID-19 pandemic crisis, considered by some authors a “black swan”, is one of these events. In this study, we assess integration and contagion in the cryptocurrency market in the COVID-19 pandemic context, using two entropy-based measures: mutual information and transfer entropy. Both methodologies reveal that cryptocurrencies exhibit mixed levels of integration before and after the onset of the pandemic. Cryptocurrencies displaying higher integration before the event experienced a decline in such link after the world became aware of the first cases of pneumonia in Wuhan city. In what concerns contagion, mutual information provided evidence of its presence solely for the Huobi Token, and the transfer entropy analysis pointed out Tether and Huobi Token as its main source. As both analyses indicate no contagion from the pandemic turmoil to these financial assets, cryptocurrencies may be good investment options in case of real global shocks, such as the one provoked by the COVID-19 outbreak.https://www.mdpi.com/1099-4300/25/1/98contagioncryptocurrenciesintegrationmutual informationtransfer entropy |
| spellingShingle | Dora Almeida Andreia Dionísio Isabel Vieira Paulo Ferreira COVID-19 Effects on the Relationship between Cryptocurrencies: Can It Be Contagion? Insights from Econophysics Approaches Entropy contagion cryptocurrencies integration mutual information transfer entropy |
| title | COVID-19 Effects on the Relationship between Cryptocurrencies: Can It Be Contagion? Insights from Econophysics Approaches |
| title_full | COVID-19 Effects on the Relationship between Cryptocurrencies: Can It Be Contagion? Insights from Econophysics Approaches |
| title_fullStr | COVID-19 Effects on the Relationship between Cryptocurrencies: Can It Be Contagion? Insights from Econophysics Approaches |
| title_full_unstemmed | COVID-19 Effects on the Relationship between Cryptocurrencies: Can It Be Contagion? Insights from Econophysics Approaches |
| title_short | COVID-19 Effects on the Relationship between Cryptocurrencies: Can It Be Contagion? Insights from Econophysics Approaches |
| title_sort | covid 19 effects on the relationship between cryptocurrencies can it be contagion insights from econophysics approaches |
| topic | contagion cryptocurrencies integration mutual information transfer entropy |
| url | https://www.mdpi.com/1099-4300/25/1/98 |
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