Elsevier

Economics Letters

Volume 207, October 2021, 110017
Economics Letters

COVID-19, Lockdowns and herding towards a cryptocurrency market-specific implied volatility index

https://doi.org/10.1016/j.econlet.2021.110017Get rights and content

Highlights

  • Use of over 100 cryptocurrencies to investigate herd investing in cryptos.

  • Presence of herding asymmetry during (extreme) bearish and bullish market conditions.

  • Significant herd behavior in cryptocurrencies during COVID-19.

  • No herding during lockdowns but significant herding during post-lockdowns.

Abstract

This study investigates herd effects in 101 cryptocurrencies during the period from January 2015 to June 2020. Our results confirm the existence of herding behavior in the cryptocurrency market for the entire sample and show that herding asymmetry is present during both bullish and bearish regimes. The asymmetry in correlated trading is particularly visible in extreme return percentile regimes (1% and 5%) of cryptocurrency market Although our study finds no evidence of correlated trading when cryptocurrency specific fear prevails in the market, crypto investors seem to mimic the trading decisions of others during the COVID-19 pandemic, outside the lockdown periods.

JEL classification

G12
G15

Keywords

Covid-19
Herding behavior
Cryptocurrencies
VCRIX
Market fear

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