Connectedness Between Cryptocurrency and Precious Metal Markets

¹ PhD student, Lecturer, Department of Economy, University of Business and science, Uzbekistan
² Independent researcher, Independent researcher, Lecturer, Department of Economy, University of Business and science, Uzbekistan
³ Independent researcher, Lecturer, Department of Economy, University of Science and Technology, Uzbekistan
⁴ PhD student, Lecturer, Department of Economy, University of Science and Technology, Uzbekistan

^* Corresponding author: Khattbovu@umail.uz

Abstract

This study examines the co-movement of cryptocurrency market returns across four indices (Bitcoin, Ethereum, Litecoin, and Ripple) and the gold market return, utilizing daily data from August 17, 2016, to June 15, 2022. We examine the connection between the returns of cryptocurrency and gold before and during the Covid-19 epidemic. We employ continuous wavelet analysis, a wavelet method deemed optimal for non-stationary time series, which is delineated into several frequency bands and segmented in the time domain. Our selection of variables is grounded on economic theory and aligns with the problem statement and aims aimed at addressing economic issues. Wavelet coherence analysis revealed a significant level of co-movement among cryptocurrency returns. Nonetheless, the comovement between cryptocurrency returns and gold market returns exhibited a minimal connection throughout the sampled time period. This signifies a lack of opportunities for portfolio diversification across cryptocurrency markets during the COVID-19 pandemic. Our findings will be of significant interest to scholars, policymakers, and investment professionals concerned with the financial ramifications of COVID-19 and cryptocurrencies.