Investigating the Impact of Covid-19 on the Relationship between Cryptocurrencies and Oil Price Shocks Using the Non-Linear Autoregressive Distributed Lag (NARDL) Approach

This study analyzed the potential nonlinear relationship between oil price shocks and the returns of leading cryptocurrencies. The present research used the price shocks of oil supply, demand, and risk. The Non-Linear Autoregressive Distributed Lag (NARDL) approach was utilized to examine the relationship between these price shocks and the returns of leading cryptocurrencies between December 8, 2019 and December 8, 2021. The results indicated that the supply shocks were most related to the returns of cryptocurrencies analyzed, especially in the pre-epidemic period of Covid-19. In addition, the short-term and long-term results of the price relationship between oil and cryptocurrencies in times of economic crisis was not stated contrary to previous forecasts. In other words, the returns of cryptocurrencies did not show the same behavior affected by the oil price pattern over time and might even work in the opposite direction. On the other hand, the dramatic growth of cryptocurrencies in many countries had led governments and policymakers to be aware of the potentially significant impact of oil prices on the stability of the cryptocurrency market. Therefore, the present study revealed a new path for policymakers to recognize the states of economy in the countries in the early stages of these cryptocurrencies and pay attention to the impact of oil price factors on the stability of this market.