Digital Assets in Disarray: Unraveling Herd Behavior Amid COVID-19 and the Russia–Ukraine War

The cryptocurrency market has experienced remarkable growth since the global financial crisis, attracting widespread attention and concern due to its departure from traditional financial systems. The evolving dynamics of this market, influenced by factors such as a loss of confidence in conventional systems, underscore the need for a deeper understanding of herd behavior. Within the context of global crises, this exploration holds significance for gaining insights into investor behavior, risk management strategies and market efficiency. The study sets out to uncover patterns of herd behavior during distinct temporal segments, including the full sample, and during periods of geopolitical tension and global crises, namely the Russia–Ukraine War and the post-COVID-19 era, respectively. The dataset spans from 1 January 2018 to 31 July 2022, segmented into three periods. We employ the static method, Markov regime-switching and the GARCH method. Empirical findings indicate herd behavior in the selected cryptocurrency market considering the full sample during periods of geopolitical tension and global crises, including the Russia–Ukraine War and the COVID-19 pandemic. The chapter contributes to the literature by bringing fresh empirical perspectives into the dynamics of herd behavior during crises, emphasizing distinct patterns observed during geopolitical conflicts and global pandemics. These significant findings offer valuable insights for portfolio management, trading strategies and risk management. Understanding the determinants of herd behavior can assist investors in navigating and avoiding such patterns, particularly during crisis periods.