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IMPACT OF COVID-19 ON CRYPTOCURRENCY
By Bhoomika Dahiya and Shorya Gupta
(bhoomikadahiya7@gmail.com
shoryagupta30@gmail.com)
DECLARATION
We hereby declare the term paper ‘Impact of covid-19 on Cryptocurrency” submitted by
Bhoomika Dahiya and Shorya Gupta is our own work.
ACKNOWLEDGEMENT
We are highly grateful to our mentor Dr. Neelam Dahiya whose valuable guidance has been the
one that helped us patch this research paper. Her suggestions and her instructions have served as
the major contribution towards the completion of this research paper.
Lastly, we are indebted to our friends and family for providing moral support and some useful
insights that have helped us finish this project in a limited time frame.
1.INTRODUCTION
Coronavirus or COVID-19 has caused quite a stir in human history. It is not a disaster that we are
facing. Support at this time seems to be the only way of life. While the epidemic has caused a few
assets and assets to lose their value, the cryptocurrency market, on the other hand, has been found
to be immune to the coronavirus. A cryptocurrency is a coin unit of encrypted data that reflects a
currency unit. It is monitored and configured for a peer-to-peer network called the blockchain,
which also serves as a secure transaction register, e.g., buy, sell, and transfer. Unlike virtual
currency, cryptocurrencies are decentralized, meaning that they are not issued by governments or
other financial institutions. Cryptocurrencies are developed (and protected) by cryptographic
algorithms that are stored and validated by a process called mining, in which a computer network
or specialized computer systems such as application-specific integrated circuits (ASICs) also
validate transactions. This process encourages miners who use the network with cryptocurrency.
Bitcoin, Ether, Litecoin, and Monero are popular cryptocurrencies.
Over the past few decades it has seen its dynamic growth and successive decline in value and value
in trade, as well as recent vibrations during the COVID-19 epidemic. Without flexibility,
cryptocurrencies of various kinds are always attractive in the global financial market. As
suggested, there are 50 million active investors involved in cryptocurrency-related trading in more
than 100 trades worldwide. First discovered in the Chinese city of Wuhan in December 2019, then
declared a pandemic by the World Health Organization (WHO) in March 2020, COVID-19 has
caused (and will likely continue to cause) significant health and economic costs worldwide. .
Almost immediately after the WHO declaration, the global financial markets experienced their
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Vol 14 Issue 10 [Year 2023] ISSN 2277 – 9809 (0nline) 2348–9359 (Print)
most dramatic crash in history. As bad as it is, we have also seen the collapse of the gold market,
which has long been considered a safe haven. Unlike traditional commodity and fenced markets,
where investors have lost a lot and become less active in times of epidemic, cryptocurrency
markets have retained their strength.
Bitcoin - the most popular cryptocurrency, has become the most valuable asset since 2020. A closer
look at Bitcoin historical prices; will appear to be extremely self-sufficient in an increase of 500
percent in six months. Other cryptocurrencies such as Ethereum, Ripple, Dogecoin etc., have also
worked well. The crypto market continues to see its longest capital to date.
Considering that the asset was introduced only a decade ago, the rate at which it is growing rapidly
is enormous. The whole system already exists, and industries are building on cryptocurrencies
around the world. Many industrial investors have turned to cryptocurrencies seeking asylum
against the inflation in the traditional economy. Even banks that had previously refused to talk
about secrecy are now setting up a store to provide cryptocurrency services to their customers.
In a comprehensive analysis of topological fluctuations and market structures, we have revealed
that various changes have taken place in the cryptocurrency market due to the impact of the
COVID-19 outbreak. We also concluded that the communication method is very effective in
identifying these changes. To the best of our knowledge, this is the first attempt in the analysis of
the network, using direct and indirect methods to investigate the impact of COVID-19 on
cryptocurrency market behavior between 2019, 2020, 2021 and 2022.
Findings of the paper:
1. Covid-19 had a positive impact on the Cryptocurrency market.
2. Bitcoin outperformed all other cryptocurrencies in showing growth trends.
3. Growth in the cryptocurrency market was the greatest during the ending of the second
and the beginning of the third wave in the majority of cryptocurrencies.
4.
The cryptocurrency market was found more or less immune to coronavirus.
OBJECTIVE
The purpose of this paper is to analyze the impact of Covid-19 on the Cryptocurrency market. As
Covid-19 attacks Wuhan, it has grown rapidly since then.
In this paper, we explore the relationships between crypto currencies (namely Bitcoin (BTC),
Ethereum (ETH), Dogecoin (DOGE), Cardano (ADA)) and waves COVID-19. This will help to
test whether cryptocurrencies can act as a defense against COVID-19.
The global COVID-19 epidemic has disrupted business as usual, and this, in turn, has affected the
continued economic development of all countries. However, economic uncertainty appears to be
following the steps of the content of COVID-19 in favor of the market signals of cryptocurrencies.
Here, this study investigates the potential and structural effects of COVID-19 on the market prices
of Bitcoin, Ethereum (ETH), Dogecoin (DOGE), Cardano (ADA) and Litecoin (LTC).
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As a result of this epidemic, people are more inclined to use digital payment methods than ever
before. In the second quarter of 2020, digital payments grew by about 82% by volume in India
when the opening phase began. The past year has been significant for cryptocurrencies and the
blockchain. In the face of these challenges and the economic downturn, cryptocurrencies have
been shown to be incredibly resilient. Fortunately, the rapid growth of high-speed internet access
and digitalization has created a mature digital currency environment. Therefore, the purpose of
this paper is to highlight the positive impact of covid and the internet on cryptocurrency with the
history of the prices of different crypto currencies in addition to the following covid waves.
LITERATURE REVIEW
Cryptocurrencies, especially Bitcoin, have attracted the attention of researchers and financial
analysts examining them on the effectiveness, efficiency, fencing properties, and relationships
with traditional financial assets. Similarly, research examining the impact of the recent epidemic
on cryptocurrencies emerged shortly after the outbreak of COVID-19.
By using a two-minute risk factor, Conlon and McGee (2020) show that Bitcoin does not function
as a safe haven and moves in the same way as the S&P 500. When Bitcoin is included in the
portfolio with the S&P 500, the lower risk portfolio grows significantly. This leads to doubts about
Bitcoin's ability to provide shelter from chaos.
Corbet et al. (2020) a sharp, temporary, strong document between the Bitcoin stock market and
the Chinese stock market after the outbreak of the COVID-19 epidemic. Conlon et al. (2020) focus
on the secure areas of Bitcoin, Ethereum and Tether during the epidemic from the perspective of
global stock market investors. They point out that Bitcoin and Ethereum cannot be considered a
safe haven as the inclusion of those cryptocurrencies in portfolios increases the risk lower.
However, Tether, the American dollar anchor, acts as a fence during the COVID-19 era.
Kristaufek (2020) argues that the COVID-19 epidemic could be considered a time to test Bitcoin's
secure capabilities. Using the quantile correlation of Bitcoin with the S & P500 and the VIX Index,
it was found that the Bitcoin safeguard did not work while gold served as the best safe haven in
the time of the epidemic.
Lahmiri and Bekiros (2020) compared the behavior of cryptocurrencies with international stock
markets during the COVID-19 period. They found that cryptocurrencies were more affected by
the epidemic than the global stock markets. There is high volatility and high volatility in the
cryptocurrency market compared to the equity market. An accessible analysis of the Grobys (2020)
dynamic intermittent communication shows that Bitcoin is not able to encircle the unusual tail risk
in US stocks. Those recent studies write that Bitcoin cannot be considered a fence tool during the
epidemic.
However, Goodell and Goutte (2020) examined the joint venture between Bitcoin and daily data
on the death of COVID-19 in the world and showed that after April 5, COVID-19 caused an
increase in Bitcoin prices. In contrast to those studies, Yarovaya et al. (2020) examine the
watchdog behavior in the cryptocurrency market. They point out that COVID-19 does not
significantly enhance the monitoring of the cryptocurrency market.
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RESEARCH QUESTION AND HYPOTHESIS
This paper aims to analyze the relationship between Cryptocurrency prices during different Covid19 waves and its overall impact on the economic growth of a country.
This study aims to conduct an analysis of whether Covid had a positive impact or a negative impact
on the cryptocurrency market. Moreover, it will also be taken into consideration that whether the
rate at which it is impacting Bitcoin differs from the rate it is impacting other cryptocurrencies like
Ethereum or Dogecoin.
The Hypothesis says:
H1: Covid-19 had a positive impact on the Cryptocurrency market.
H2: Bitcoin outperformed all other cryptocurrencies in showing growth trends.
H3: Growth in the cryptocurrency market was the greatest during the ending of the second and the
beginning of the third wave for the majority of cryptocurrencies.
DATA AND METHODOLOGY
Under this study, the prices of various cryptocurrencies have been extracted as per the timeline:
Pre-covid (April 2019), beginning of first wave (March 2020), ending of first wave (September
2020), beginning of second wave (April 2021), ending of second wave (July 2021), beginning of
third wave (January 2022) and the ending of third wave (February 2022)
The data used is standard and secondary in nature which has been collected from the website of
Statista. The prices of various cryptocurrencies are in US Dollars.
To analyze the results, tables, scatter fragments and charts are used wherever possible as the data
is naturally contained. After the data from all sources has been collected, the stated conclusions
have been reached out by creating charts in Excel.
RESULT ANALYSIS
BITCOIN
TIMELINE
PRICES(in US$)
MARKET CAP(in US$)
Pre-covid times
5,198.90
91,674,230,185.93
First wave-beginning
8,562.45
156,238,987,739.91
First wave-ending
10,280.35
189,997,214,393.29
Second wave-beginning
58,758.56
1,097,232,660,348.16
Second wave-ending
35,287.78
661,574,836,314.86
Third wave-beginning
47,345.22
895,688,387,523.14
Third wave-ending
42,412.43
803,744,511,638.35
Table 6.1
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Figure 6.1.1
Figure 6.1.2
The above graphs show the increase in price of Bitcoin from 5198.90 USD to 10280.35 USD
when the first wave of the pandemic was ending with a market cap of one hundred eighty-nine
billion USD. It reached its peak at 58758 USD during the beginning of the second wave of the
pandemic with a market cap of 1,097,232,660,348 USD and by the end of the third wave it reached
42412.43 USD.
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6.2 ETHEREUM (ETH)
TIMELINE
PRICES(in US$)
MARKET CAP(in US$)
Pre-covid
174.53
18,424,576,820.42
First wave beginning
218.97
24,069,393,931.83
First wave ending
353.36
39,751,917,522.78
Second wave beginning
2,093.12
241,411,837,678.00
Second wave ending
2,321.72
270,621,669,241.04
Third wave beginning
3,829.57
455,713,570,380.85
Third wave ending
3,057.48
365,288,302,066.81
Table 6.2
Figure 6.2.1
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Figure 6.2.2
The above graphs show the increase in price of Ethereum from 174.53 USD to 353.36 USD when
the first wave of the pandemic was ending with a market cap of 39 billion USD. It reached its peak
at 3,829.57 USD with a market cap of 455 billion USD during the beginning of the third wave of
the pandemic and by the end of the third wave it reached 3,057.48 USD.
6.3 LITECOIN (LTC)
TIMELINE
PRICES(in US$)
MARKET CAP(in US$)
Pre-covid
92.31
5,653,406,711.33
First wave beginning
57.96
3,720,790,354.57
First wave ending
48.05
3,142,675,721.59
Second wave beginning
30.96
12,924,960,735.92
Second wave ending
144.91
9,672,815,312.51
Third wave beginning
151.26
10,486,459,759.57
Third wave ending
127.45
8,867,877,410.73
Table 6.3
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Figure 6.3.1
Figure 6.3.2
The above graphs show the decrease in price of Litecoin from 92.31 USD to 48.05 USD when the
first wave of the pandemic was ending with a market cap of 3 billion USD. It reached its peak at
151.26 USD with a market cap of 10 billion USD during the beginning of the third wave of the
pandemic and by the end of the third wave it reached 127.45 USD.
6.4 DOGECOIN (DOGE)
TIMELINE
PRICE INDEX
MARKET CAP
Pre-covid
0.25
406,652,917.49
First wave beginning
0.18
281,031,073.16
First wave ending
0.27
351,568,868.17
Second wave beginning
30.63
7,407,664,647.51
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Second wave ending
20.62
32,117,665,810.75
Third wave beginning
13.97
23,138,181,422.90
Third wave ending
12.37
20,400,845,319.46
Table 7.4
Figure 6.4.1
Figure 6.4.2
The above graphs show the increase in price of Dogecoin from 0.003418 USD to 0.0574 USD
during the beginning of the second wave with a market cap of 7 billion USD. It reached its peak
at 0.2465 USD with a market cap of 32 billion USD during the ending of the second wave of the
pandemic and by the end of the third wave it reached 0.1538 USD.
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6.5 CARDANO(ADA)
TIMELINE
PRICE INDEX(in US$)
MARKET CAP(in US$)
Pre-covid
0.9048
2,345,996,89,444
First wave beginning
0.04593
1,190,893,585.98
First wave ending
0.09306
2,412,763,133.87
Second wave beginning
1.19
38,063,850,600.58
Second wave ending
1.46
46,583,637,655.56
Third wave beginning
1.38
46,129,061,735.77
Third wave ending
1.14
38,433,324,420.14
Table 6.5
Figure 6.5.1
Figure 6.5.2
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The above graphs show the increase in price of Cardano from 0.9048 USD to 1.19 USD during
the beginning of the second wave with a market cap of 38 billion USD. It reached its peak at 1.46
USD with a market cap of 46 billion USD during the ending of the second wave of the pandemic
and by the end of the third wave it reached 1.148 USD.
REGRESSION ANALYSIS
8.1 Bitcoin:
Figure 8.1.1
Figure 8.1.2
Call is just the repeat of the Regression code entered. Residuals indicate the distance between
actual data point and regression line( which is assumed to be normally distributed).
Ideally, the median should be 0, 1Q and 3Q should reflect and so does maximum and minimum.
The Regression function can be written asY= 1.890e+07X - 4.470e+09
H0: No linear relationship between MarketCap and Prices.
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H1: Linear relationship between MarketCap and Prices.
As assumed, the value of α is 0.05. The null hypothesis will be rejected if p<α and will not be
rejected if otherwise. The p-value for Simple Linear Regression Model will be the same as
performing the Pearson Correlation test.
In this case, p<α, thus, null hypothesis will be rejected. Hence, there is a linear relationship between
MarketCap and Prices.
Residual standard error is the average distance that observed values fall from the regression line.
The lower the residual error, the more precise the regression model.
Multiple R- squared in this case indicates, 99.98% variance in MarketCap can be accounted for by
the Prices.
8.2 Ethereum:
Figure 8.2.1
Figure 8.2.2
The Regression function can be written asY= 1.194e+08X - 3.351e+09
H0: No linear relationship between MarketCap and Prices.
H1: Linear relationship between MarketCap and Prices.
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As assumed, the value of α is 0.05. The null hypothesis will be rejected if p<α and will not be
rejected if otherwise. The p-value for Simple Linear Regression Model will be the same as
performing the Pearson Correlation test.
In this case, p<α, thus, null hypothesis will be rejected. Hence, there is a linear relationship between
MarketCap and Prices.
Residual standard error is the average distance that observed values fall from the regression line.
The lower the residual error, the more precise the regression model.
Multiple R- squared in this case indicates, 99.97% variance in MarketCap can be accounted for by
the Prices.
8.3 Litecoin:
Figure 8.3.1
Figure 8.3.2
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The Regression function can be written asY= -9.782e+09 + 1.292e+10
H0: No linear relationship between MarketCap and Prices.
H1: Linear relationship between MarketCap and Prices.
As assumed, the value of α is 0.05. The p-value for Simple Linear Regression Model will be the
same as performing the Pearson Correlation test.
Residual standard error is the average distance that observed values fall from the regression line.
The lower the residual error, the more precise the regression model.
Multiple R- squared in this case indicates, 100% variance in MarketCap can be accounted for by
the Prices.
8.4 Dogecoin:
Figure 8.4.1
Figure 8.4.2
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The Regression function can be written asY= 1.299e+10X + 7.408e+09
H0: No linear relationship between MarketCap and Prices.
H1: Linear relationship between MarketCap and Prices.
As assumed, the value of α is 0.05. The p-value for Simple Linear Regression Model will be the
same as performing the Pearson Correlation test.
Multiple R- squared in this case indicates, 100% variance in MarketCap can be accounted for by
the Prices.
8.5 Cardano:
Figure 8.5.1
Figure 8.5.2
The Regression function can be written asInternational Research Journal of Management Sociology & Humanity ( IRJMSH )
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Y= 3.609e+10X + 2.346e+09
H0: No linear relationship between MarketCap and Prices.
H1: Linear relationship between MarketCap and Prices.
As assumed, the value of α is 0.05. The p-value for Simple Linear Regression Model will be the
same as performing the Pearson Correlation test.
Multiple R- squared in this case indicates, 100% variance in MarketCap can be accounted for by
the Prices.
CONCLUSION
Positive Impacts of COVID-19 on Cryptocurrency
Market instability is inevitable. Still, people were buying cryptocurrency that made the crypto
market attractive to the crowd.
● Prices dropped by half in March 2020, down to $ 3,780. Since then, Bitcoin has gained a lot of
wealth and popularity in this epidemic.
● Emotions have become so good that they have pushed Bitcoins and Altcoins, surpassing the few
records available. As of now, the Bitcoin market has a staggering $ 1.1 TN, comprising half of the
cryptocurrency market, more than $ 2 TN.
● While some assets were losing value, cryptocurrencies, on the other hand, proved to be reliable
assets in these difficult times.
● Despite this fatal outbreak, Cryptocurrency trading in India continued to grow their business and
their numbers. Also, this has led to the opening of new Bitcoin Exchanges in India.
Months ago, the RBI had banned cryptocurrency as illegality was the cause. But recently, the
Supreme Court of India overturned the ban, stating that this was not yet the case but that it was
also illegal.
Despite the threat circulating over cryptocurrency, the volume in India itself 8 million Holdings
up to 100 billion rupees corresponding to tokens held by Indian investors. Initially, the analytical
analysis helped investors book profits. But over time, people realize that it is more secure and more
secure than ever before and can be a reliable asset in extreme cases. Cryptocurrency Exchange in
India like WazirX, CoinSwitchKuber has started to grow their business and doubled their wealth.
Several Bitcoin exchanges were opened in India which allowed newcomers to invest and trade in
Bitcoins.
While some assets are losing value, cryptocurrencies, on the other hand, were proving themselves
to be reliable assets in these difficult times. Despite this deadly outbreak, Cryptocurrency trading
in India continued to grow their business and their numbers. Also, this has led to the opening of
new Bitcoin Exchanges in India.
As covid-19 puts everything in perspective, people are becoming more aware of the
cryptocurrency market. Considering that the asset was introduced only a decade ago, the rate at
which it is growing rapidly is enormous.
As evident in the graphs as well, the trendline is an upward sloping line showing a positive
relationship between prices on cryptocurrency and Covid-19.
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