The risk interdependence of cryptocurrencies: Before and during the COVID-19 pandemic

Abstract

In this paper, we measure the risk interdependence of 12 major cryptocurrencies before and during the COVID-19 pandemic, based on a GARCH-Copula-VaR approach and a dynamic network analysis. We find that cryptocurrencies generally show high levels of volatility, speculation, homogeneity and tail risk contagion. Furthermore, the COVID-19 pandemic has a continuous impact on the cryptocurrency market. When financial institutions are increasingly investing in crypto assets, the hidden risks in the cryptocurrency market remain high. Therefore, this paper calls for attention on the cryptocurrency market from both investors and regulators.