The Resilience of Cryptocurrency Market Efficiency to Covid-19 Shock

Fernandes, Leonardo  Silva; Bejan, Lucian; Silva, José  W. L.; Bouri, Elie; Antunes de Araujo, Fernando Henrique

doi:10.2139/ssrn.4097299

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The Resilience of Cryptocurrency Market Efficiency to Covid-19 Shock

12 Pages Posted: 3 May 2022

See all articles by Leonardo Silva Fernandes

Leonardo Silva Fernandes

Universidade Federal Rural de Pernambuco (UFRPE)

Fernando Henrique Antunes de Araujo

Federal Institute of Science and Technology

Abstract

We examine the price disorder and market efficiency of five cryptocurrencies (Bitcoin, BNB, Cardano, Ethereum, and XRP) before and during COVID-19 pandemic period. Using permutation entropy and Fisher information measure (FIM), we construct the Shannon-Fisher causality plane (SFCP) to map these cryptocurrencies and their respective locations in a two-dimensional plane and then apply sliding time window approach to study the temporal evolution of efficiency. All cryptocurrencies exhibit high but slightly varying informational efficiency during both periods. Cardano is the most efficient. These results might point to the increasing maturity and lower potential for price predictability, which matter to cryptocurrencies usage for liquidity risk diversification strategy.

Keywords: Cryptocurrencies, Price time series, COVID-19, Information theory quantifiers, Economic efficiency

Suggested Citation: Suggested Citation

Fernandes, Leonardo Silva and Bejan, Lucian and Silva, José W. L. and Bouri, Elie and Antunes de Araujo, Fernando Henrique, The Resilience of Cryptocurrency Market Efficiency to Covid-19 Shock. Available at SSRN: https://ssrn.com/abstract=4097299 or http://dx.doi.org/10.2139/ssrn.4097299