The impact of COVID-19 process on cryptocurrency investments

The COVID-19 pandemic has had a significant impact on the global economy and financial markets, and this effect has also been notably reflected in the cryptocurrency market. Cryptocurrencies have emerged as an alternative investment vehicle that has captured the attention of investors in recent years. This study analyzes the impact of the COVID-19 pandemic on cryptocurrency investments, with a particular focus on the price movements of Bitcoin, the cryptocurrency with the highest market value. The analysis utilizes daily price data of Bitcoin from 01/01/2017 to 01/01/2023. ARCH and GARCH models, which are commonly used for volatility forecasting, are employed in the study. These models are known for their effectiveness in understanding and predicting the volatility structure of financial markets. The onset of the COVID-19 pandemic created significant uncertainty across financial markets and altered investors' risk perceptions. During this period, the cryptocurrency market experienced substantial fluctuations. Findings from the study indicate that the price volatility of Bitcoin increased significantly during the COVID-19 pandemic. This suggests that investor interest in cryptocurrencies rose during this period, leading to a more speculative market. The results also reveal that the effect of shocks on volatility is constant for Bitcoin, with positive shocks having a much stronger impact compared to negative shocks. Based on these findings, the study emphasizes the use of specific methods and tools to understand the dynamics of the cryptocurrency market and to shape investment strategies accordingly. Keywords: Cryptocurrency, Covid-19, GARCH, ARCH