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JEL Classification System

C58, G11, G32

Abstract

The COVID-19 pandemic has been causing unprecedented economic downturn worldwide. As it wreaks havoc on every aspect of global economic activities, stakeholders are wondering how its impact can be quantified to craft viable responses. In the exotic field of cryptocurrencies, prior to the pandemic, everyone was excited about Bitcoin and its multitude of potentials. However, a day after COVID-19 was officially announced by the World Health Organization as a pandemic, the rate of return to Bitcoin dropped by an unheard-of one-day decline of -46.5%, and people started to rethink the prospects of Bitcoin. A day after this steep decline, Bitcoin recovered and started a sustained bull run which lasted for almost a year and even posted an all-time high daily uptick of 59.6%. By the end of July 2021, the price reached its all-time high but lost more than half of it at the end of the sample period. This study aims to empirically analyze the risk-return profile and the market efficiency of Bitcoin utilizing a 1,306-day data set conveniently subdivided into pre-pandemic and pandemic periods. The general conclusion of the study is: During the pandemic, Bitcoin is extremely volatile and does not subscribe to the efficient market hypothesis.

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