Coronavirus Pandemic Impact on the Nexus Between Gold and Bitcoin Prices

Abstract

This study aims to explore the Coronavirus disease (COVID-19) effects on gold and bitcoin prices variabilities and on the relationship between each of them, both prices are denominated in USD.

The study period is divided into two groups, first group included 120 workdays before 30 January 2020 when WHO first declared COIVD-19 outbreak as a public health emergency of international concern, and the second group included 120 observations post that date. The period as a total extends from June. 24, 2019 to 22 of May 2020.

To this end, the study used the appropriate statistical tools including stationery and unit root test, Levene's test for the equality of variances, correlation, least squares regression, and pairwise Granger causality test.

The results of testing the equality of variances and homogeneity between each of the study groups before and after COVID 19 revealed a strong rejection of the null hypothesis of equal variances for gold but not bitcoin which was accepted. The results also indicate a significant relationship between gold and bitcoin before and after COVID-19, but the sign changed from negative to positive respectively.

Finally, the study concludes that there were significant effects of COIVD-19 on gold but not bitcoin prices. These results are consistent with gold’s traditional role as a safe-haven in crises, and bitcoin as a ‘virtual gold’ which has some similarities, and likely to be complementary rather than in a competion with gold.