The Effect of Coronavirus Pandemic and Recognition on Bitcoin with Precious Metal Prices: A Causality Analysis

Abstract

Coronavirus (COVID-19), which emerged as an epidemic in China in December 2019, has been recognized as a pandemic by the World Health Organization as of March 2020. Events regarding the coronavirus shocked the markets and were seen as a threat to the markets. In this context, this study aims to examine the effect of the COVID-19 on Bitcoin prices and precious metals which are seen as low-risk assets in global markets. In the study, the causality relationship between the daily number of COVID-19 cases approved by the WHO and Google trends, and the price series of Bitcoin, Gold, Silver, Platinum, Palladium was investigated to determine the effects of the developments in the course of the epidemic on the prices of Bitcoin and precious metals. Toda-Yamamoto causality test was performed in the study where daily data were used between 19.01.2020-31.03.2021. According to the findings, a causality relationship could not be determined between the number of COVID-19 cases with Bitcoin and precious metals while it was observed that the recognition of COVID-19 has a very strong causal effect on Bitcoin prices and the prices of other precious metals except silver. In addition, a reciprocal causality relationship has been identified between the confirmed COVID-19 cases and the recognition of COVID-19.