Abstract
The rapid worldwide spread of COVID-19 forced many countries to enforce complete lockdown and strict quarantine policies. The strict lockdown and quarantine affect the psychological state of people toward cryptocurrency. The current research aims to examine the effect of COVID-19 on Bitcoin prices concerning cumulative deaths and confirmed cases. The research comprises daily data from January 20, 2020, to April 30, 2020, during the initial worldwide breakout of COVID-19. This research employed the augmented Dickey-Fuller test to check the stationarity of data, the co-integration test for the interdependency of variables, and the vector error correction model for identifying the direction and long or short-run relationship between Bitcoin prices and COVID-19. The research results show that Bitcoin prices are negatively significant and related to COVID-19 in the short-run. A unidirectional relationship between Bitcoin prices and cumulative deaths is also observed. Investors and the public’s psychological state were positively significant to Bitcoin prices in the long-term because of cashless transactions, unbanked, and less risky virus traveling. The second reason behind the positive psychological relation is un-centralization and easy-to-make payments by Bitcoin. This study’s finding provides timely evidence to decision-makers on Bitcoin price volatility and its impacts on the public’s psychological states regarding COVID-19.
Highlights
A new type of financial asset named “cryptocurrency” has been introduced recently
The data sets were extracted from different cites, i.e., the COVID19 data was from the World Health Organization (WHO), and the Bitcoin data was from the coin desk official
The null hypothesis of a unit root in the series could not be rejected at a 10% level of significance, except for cumulative deaths
Summary
A new type of financial asset named “cryptocurrency” has been introduced recently. Bitcoin is the dominant element of the cryptocurrency market, a growing and highly volatile market (Bariviera, 2017). The pseudonymous author Satoshi Nakamoto introduced this virtual currency in 2008, and it was traded openly in 2009 (Nakamoto, 2008). Cryptocurrency is a revolutionary addition to electronic trade and exchange. The number of cryptocurrencies is increasing daily, and at present, it is over 5500. Bitcoin is vital in all cryptocurrencies, as it provides a fast, secure, and inexpensive exchange medium to its users
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