Crypto Market During COVID: What Role Did Investor Interest Play?

Ever wondered how investor interest impacts the ups and downs of cryptocurrencies, especially during a global pandemic like COVID-19? This study looked at the top 20 cryptocurrencies from January 2016 to April 2021 to find out. They used a method called Two Stages Least Squares to see how investor attention and market reversals affected returns. Guess what? Investor attention boosted Bitcoin's returns both before and during the pandemic, but with an even bigger effect during COVID-19. On the other hand, market reversals were good for crypto returns before the pandemic but not so much during it. The study also found that investor attention had a positive impact on smaller and medium-sized cryptocurrencies, while reversals only helped the smaller ones.

Stablecoins, which are designed to stay steady, proved to be a safe haven during the pandemic. They didn't get much of a boost from investor attention or reversals, showing that they're tough to shake. Each wave of the pandemic pushed the crypto market down, but that's no surprise given the pressure from investor attention and how people act in financial markets. This research doesn't back up the idea of efficient markets or that all investors are the same. Instead, it suggests that investor interest plays a big role in how cryptocurrencies behave. This information could help both investors and policymakers make better decisions in the crypto world.

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