Cryptocurrency liquidity and volatility interrelationships during the COVID-19 pandemic

We examine the interactions between cryptocurrency price volatility and liquidity during the outbreak of the COVID-19 pandemic. Evidence suggests that these developing digital products have played a new role as a potential safe-haven during periods of substantial financial market panic. Results suggest that cryptocurrency market liquidity increased significantly after the WHO identification of a worldwide pandemic. Significant and substantial interactions between cryptocurrency price and liquidity effects are identified. These results add further support to the argument that substantial flows of investment entered cryptocurrency markets in search of an investment safe-haven during this exceptional black-swan event.

Automated summary

This study examines the relationship between cryptocurrency price volatility and liquidity during the COVID-19 pandemic. The findings indicate that cryptocurrencies have emerged as potential safe-haven assets during times of financial market panic. The liquidity of cryptocurrency markets increased significantly after the World Health Organization declared a global pandemic. The results suggest significant interactions between cryptocurrency price and liquidity, supporting the argument that substantial investments entered the cryptocurrency markets as a safe-haven during this exceptional black-swan event.