An event study analysis of Bitcoin and Altcoins under COVID-19

Abstract

Operating through blockchain, cryptocurrencies eliminate intermediaries and encourage transparency between parties. Although Bitcoin continues to be the most widely used cryptocurrency, its increased attractiveness to investors has led to the emergence of Altcoins (alternative cryptocurrencies other than Bitcoin). Employing an event study approach using the daily price series for the sample period from 1 January 2018 to 17 July 2020, the study aims to determine the impact of Covid-19 on the value of both Bitcoin and Altcoins. The evidence shows that the abnormal returns of Bitcoin and Altcoins around Covid-19 dates are negative and Altcoins are more adversely affected by the pandemic than Bitcoin. The study also documents that most altcoins rely on the same block chain technology aiming to complement or improve certain Bitcoin characteristics, and the high correlation between Bitcoin and Altcoins are likely to fail cross-currency hedging strategies during the pandemic crisis.