Impact of Russia-Ukraine war attention on cryptocurrency: Evidence from quantile dependence analysis

Cryptocurrency values have recently fallen substantially. Why? We examine the impact of attention on the Russia-Ukraine War, proxied by Google Trends, on cryptocurrencies (and equity) to measure the returns coherences. Using quantile cross-spectral analysis and daily data for February 24, 2022-June 21, 2022, we observe that co-movements between War attention and cryptocurrencies depends on investment horizon and market state. Under bearish and normal (bull) markets, War attention negatively (positively) affects all cryptocurrencies in the short term. Results are consistent with cryptocurrency investors responding to War attention by seeking liquidity, with recent price falls explained as sell-offs by large holders.

Automated summary

The recent substantial decrease in cryptocurrency values can be attributed to the increased attention on the Russia-Ukraine War. By using Google Trends as a proxy for war attention, the study analyzes the coherence between war attention and cryptocurrency returns. The results show that the relationship between war attention and cryptocurrencies depends on the investment horizon and market state. In bearish and normal markets, war attention negatively and positively affects cryptocurrencies in the short term, respectively. This indicates that cryptocurrency investors respond to war attention by seeking liquidity, leading to sell-offs by large holders that explain the recent price falls.