![]() ![]() Furthermore, common beliefs regarding cryptocurrencies soon becoming a widely payment method also trigger sharp increases in cryptocurrency prices (Chaim and Laurini 2019). Monetary expansion during the pandemic may cause bubbles in these speculative assets’ prices. Fourth, cryptocurrencies seem to be speculative investments rather than real currencies (Yermack 2015). Therefore, expecting cryptocurrency market bubbles is plausible owing to cryptocurrencies being financially innovative products. ![]() Third, bubbles are closely related to technological innovation (Pástor and Veronesi 2009 Frehen et al. 2018) may cause explosive cryptocurrencies price movements. Second, digital currency market inefficiency (Urquhart 2016 Zhang et al. Cryptocurrencies, for instance, have no fundamental value (Cheah and Fry 2015). First, a bubble is characterized as a divergence between an asset’s market value and intrinsic value. The possibility of bubble formation in cryptocurrency prices originates from several factors. Soaring cryptocurrency prices, without any clear justification, have triggered suspicion about whether these sharp price increases represent speculative bubbles. Furthermore, we examine determinants of the bubbles by addressing herd behavior and cryptocurrency-specific and market-related factors. We also investigated co-explosivity among cryptocurrencies to understand the transmission of bubbles from one cryptocurrency to another. Our study concentrates on the economic aspects of the cryptocurrency market and attempts to determine whether cryptocurrencies prevail in bubble behavior, given the rapidly increasing prices during the unstable market conditions brought by the COVID-19 pandemic (Jalal et al. ![]() Conversely, discussions on the economic aspect revolve around issues such as efficiency, diversification benefits, and price dynamics (Corbet et al. Discussions on the social aspect predominantly focus on using cryptocurrencies in illegal transactions such as money laundering and illicit financing. Social and economic aspects, two essential aspects in cryptocurrencies, have received considerable attention. Rising public interest in cryptocurrencies and soaring cryptocurrency prices has ignited discussion in both academic and political fields. Cryptocurrency, powered by blockchain technology, is an exceptionally innovative product that has shaped financial technology in recent years. Overall, our results suggest that bubble behavior is common in the cryptocurrency market, contradicting the efficient market hypothesis.įinancial technology-especially payment and money transfer systems-has become quite popular owing to its considerable contribution to the financial system by lowering trading costs and improving trading quality (Kou et al. ![]() Alternative liquidity, volatility, and Google Trends measures are used for robustness analysis and yield similar results. Hence, investors should exercise caution when investing in cryptocurrencies and follow both crypto currency and market-related factors to estimate bubbles. Regarding cryptocurrency and market-specific factors, we found that Google Trends and volume are positively associated with predicting speculative bubbles in time-series and panel probit regressions. During the pandemic, herd behavior was evident among investors however, this diminishes during bubbles, indicating that bubbles are not explained by herd behavior. Moreover, we found that explosive behavior in one currency leads to explosivity in other cryptocurrencies. Our results indicate that each cryptocurrency covered in the study presented bubbles. This study investigates speculative bubbles in the cryptocurrency market and factors affecting bubbles during the COVID-19 pandemic. ![]()
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