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Total and Net-Directional Connectedness of Cryptocurrencies During the Pre- and Post-COVID-19 Pandemic

Author

Listed:
  • Le Thanh Ha

    (National Economics University, Vietnam)

  • Nguyen Van Dai

    (National Economics University, Vietnam)

Abstract

This paper presents how volatility propagates through the cryptocurrency market. Our paper provides evidence for volatility connectedness on cryptocurrencies. The different econometric techniques, including the stochastic volatility (SVOL) model and time-varying parameter VAR models using a quasi-Bayesian local likelihood (QBLL), are applied to measure the volatility of the cryptocurrency market. Using high-frequency, intra-day data of the largest cryptocurrencies over 2018–2021, we detect the great volatility of the cryptocurrency market are the beginning of 2019, the beginning of 2020, and throughout the year of 2021. The total connectedness values suggest that the cryptocurrency market becomes volatile as the new strains of the COVID-19 appear at the end of 2021. However, by using directional connectedness, we reveal that there are negative and positive spillovers from a specific cryptocurrency to other cryptocurrencies. The great fluctuations in the period before the COVID-19 health crisis stem from the positive resonance (symmetric) between the volatility of each cryptocurrency, while this health crisis leads to substantially positive and negative spillovers (asymmetric) of cryptocurrencies, and this makes market volatility weaker than it actually is.

Suggested Citation

  • Le Thanh Ha & Nguyen Van Dai, 2022. "Total and Net-Directional Connectedness of Cryptocurrencies During the Pre- and Post-COVID-19 Pandemic," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 13(01), pages 1-30, February.
    • Handle: RePEc:wsi:jicepx:v:13:y:2022:i:01:n:s1793993322500041
    DOI: 10.1142/S1793993322500041
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    Cited by:

    1. Tao, Chen & Zhong, Guang-Yan & Li, Jiang-Cheng, 2023. "Dynamic correlation and risk resonance among industries of Chinese stock market: New evidence from time–frequency domain and complex network perspectives," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 614(C).

    More about this item

    Keywords

    Cryptocurrency; COVID-19 pandemic; volatility; connectedness; spillover;
    All these keywords.

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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