Impact of Covid-19 on major cryptocurrencies

On December 19, 2019,  the first confirmed case of coronavirus was discovered in Wuhan, China. In the months that ensued, the novel coronavirus continued to infiltrate other cities across China. The virus continued to spread across different countries, and on March 11, 2020, the World Health Organization officially labeled the virus a global pandemic. As the virus spread across the globe, governments responded by endorsing travel restrictions and going into lockdown. This disrupted the global economy tremendously. The stock market saw its fastest and most dramatic fall in history since 1929.

What followed was a wave of extreme fear, panic, and uncertainty, which further prompted the liquidity crisis at the beginning of the crisis. The fear of financial losses made frantic investors convert most of their holdings into cash to avoid the massive losses after the anticipated fall in the value set off. Unfortunately, the digital currency market, commonly known for sudden price fluctuations, was not spared. Between February and March, when fears and anxiety grew, the prices of major cryptocurrencies took a steep fall, most of them losing more than half of their value within a month.

According to CoinMarketCap,  the total value of digital currencies fell from US$308 billion to US$118 billion between February 14 to March 12. To be more precise, the value of Bitcoin, the world’s most popular and successful digital currency by market capitalization, fell from over US$10,000 on February 13 to below US$4,120 by March 12.

Other popular digital currencies also experienced a sharp decline in value. Ether, the second most popular digital currency by market capitalization after Bitcoin, dropped by more than 66% during the same period. A similar fate befell XRP, the digital token used by the Ripple network experienced a value decline of more than 66% between February 13 to March 12.

For some time, both digital currencies and traditional stocks followed a similar path as both saw a constant and sharp decline in value. However, in the months that followed, Bitcoin began recovering and experienced sharp gains while the value of stocks continued to depreciate. Today, the value of Bitcoin has bounced back, reaching a higher value of 13,400 USD, the highest point in the year.

Bitcoin as a safe haven

Sometime in 2016, Chris Burniske, a very prominent and experienced blockchain analyst, argued that Bitcoin could be considered a safe haven asset, describing it as digital gold whose value would be unimpacted by changing economic conditions. However, the decline in Bitcoin’s value following the fear surrounding the coronavirus pandemic only questioned the perception of Bitcoin as a digital safe-haven asset.


Corbet, S., Larkin, C., & Lucey, B. (2020). The contagion effects of the covid-19 pandemic: Evidence from gold and cryptocurrencies. Finance Research Letters, 101554.

James, N., Menzies, M., & Chan, J. (2020). Changes to the extreme and erratic behaviour of cryptocurrencies during COVID-19. Physica A: Statistical Mechanics and its Applications, 125581.

Umar, Z., & Gubareva, M. (2020). A time–frequency analysis of the impact of the Covid-19 induced panic on the volatility of currency and cryptocurrency markets. Journal of Behavioral and Experimental Finance28, 100404.

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