Bitcoin Stability during the Pandemic

[Kakashi2020]

In the first phase of the pandemic, when it was not known how the whole situation would develop, there was an escape from risky financial instruments to bitcoin. One could observe a positive correlation of bitcoin with financial instruments considered safe, such as the Swiss franc, Japanese yen, gold and silver. Then there was a further increase in the number of infections around the world and the associated sharp drops in global stock markets - especially in the US - due to a total sell-off of all assets, including bitcoin. Investors resorted to cash, mainly the yen and the dollar. During this period, bitcoin lost its safe-haven status, but the same was true of gold and silver. Still, it behaved like a regular, traditional, and reliable financial instrument. Particularly significant is the correlation of bitcoin (BTC) and ethereum (ETH) with conventional financial instruments during the spikes on global stock exchanges as the epidemic slows down during the summer of 2020.

"This is an intriguing effect because there were no such correlations before the pandemic, and they remain at a significant level. It may be proof that bitcoin has become a full-fledged element of the financial market. One can say that the COVID-19 pandemic has positively verified cryptocurrencies. It turned out that investors were not afraid of bitcoin; quite the opposite - they included it in their investment portfolios," Dr. Marcin Watorek describes the research findings.