The Mediation effect for Bitcoin, Evidence from China Market on the Period of Covid-19 Outbreaking

Abstract

The outbreak of Wuhan pneumonia in China in January 2020, we observed that sharp falls in Chinese stock markets were often followed by a brief drop in the price of Bitcoin followed by a notable increase. The fact that the outbreak of infectious disease in China had little impact on US markets and at least a portion of the funds flowed back to the US through Bitcoin transactions suggests that the price of Bitcoin is related to an outflow of Chinese funds to the US. Our analysis combining the computational aspects of cumulative prospect theory with the stochastic dominance method indicates that investors facing instability on Chinese markets use Bitcoin for hedge trading, perhaps as an intermediary in times of emergency.