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The resilience of cryptocurrency market efficiency to COVID-19 shock

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  • Fernandes, Leonardo H.S.
  • Bouri, Elie
  • Silva, José W.L.
  • Bejan, Lucian
  • de Araujo, Fernando H.A.

Abstract

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

Suggested Citation

  • Fernandes, Leonardo H.S. & Bouri, Elie & Silva, José W.L. & Bejan, Lucian & de Araujo, Fernando H.A., 2022. "The resilience of cryptocurrency market efficiency to COVID-19 shock," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 607(C).
    • Handle: RePEc:eee:phsmap:v:607:y:2022:i:c:s0378437122007762
    DOI: 10.1016/j.physa.2022.128218
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    Cited by:

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    6. Ghosh, Bikramaditya & Bouri, Elie & Wee, Jung Bum & Zulfiqar, Noshaba, 2023. "Return and volatility properties: Stylized facts from the universe of cryptocurrencies and NFTs," Research in International Business and Finance, Elsevier, vol. 65(C).
    7. Sayed Mohammad Mousavi & Yazdan Shahin Rad, 2023. "Challenges and Legal Aspects of Financing Projects Through Cryptocurrencies in Iran," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 13(4), pages 127-151.
    8. Bennett, Donyetta & Mekelburg, Erik & Strauss, Jack & Williams, T.H., 2024. "Unlocking the black box of sentiment and cryptocurrency: What, which, why, when and how?," Global Finance Journal, Elsevier, vol. 60(C).
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