The first known cases of Covid-19 were first reported by the officials in Wuhan City, China in December 2019. There are 41,570,883 cases and 1,134,940 confirmed deaths due to Covid-19 across the world as reported by WHO as of 23rd October 2020 and the figure increases daily. The damage caused by the virus is enormous and is likely to have long-term effects on the global economy. The traditional financial markets are responding negatively to news about the virus and stock prices were declining. [1]. The increasing number of cases and the uncertainty of the future has spread fear and anxiety among the people and investors. The world economy took a toll on this pandemic due to decline sales in businesses, consumers changed their buying behaviour, reduced production of goods, unemployment rates increased worldwide as well as financial burden faced by individuals and companies. These fragilities in the industry jeopardise financial markets including cryptocurrency trading. Majority of the cryptocurrencies are seeing rapid price changes causing buyers to feel insecure in trying out the market. 

Any useful form of money must serve as a medium of commerce, a store of value and unit of account. Both fiat money and cryptocurrency do provide this service, but they differ in several ways. Fiat currency is a form of legal money backed by the sovereign government of the country that issues it [2]. The Euro and US dollars, as well as many other major world currencies, are examples of fiat currency. Cryptocurrency is a digital currency in which transactions are verified and the records maintained by a decentralised system using mathematical cryptography technique and network consensus protocols, rather than by a third-party centralised authority [2]. It can be used as a form of peer-to-peer digital money, relying solely on the blockchain ledger and network of computers for verification rather than a centrally controlled body such as a central bank.

Cryptocurrency was first mentioned in 2008 whitepaper published by Satoshi Nakamoto, a pseudonymous group or an individual [3]. Shortly after that, Nakamoto mined the first Bitcoin also known as genesis block and launched the world’s first cryptocurrency, creating a hype from a group of miners. Then, over the years, a large number of people have contributed in making new changes in the cryptocurrency scene by adding new features and patching vulnerabilities. According to Coin Market Cap portal, there are a total of 2,677 listed cryptocurrencies as of June 2020 and the number keep increasing every day. People mainly trade and hold cryptocurrencies as digital asset investments by making profits from buying cryptocurrencies at their initial offerings when the price is low and sell them when the price is higher or, just simply keep the crypto as investment and expect long-term capital gains. Some investors are using cryptocurrencies to diversify their portfolios, believing that cryptocurrencies are good economic alternative to store value in difficult times [4].

Cryptocurrency trading refers to the act of exchanging one cryptocurrency for another, buying and selling and also trading fiat money for cryptocurrency. As stated above, the goal of cryptocurrency trading is making profits by buying when the price is low and selling when the price skyrockets. Traders can make huge profits from buying crypto currencies at their initial offerings and sell them when the prices increase. Nevertheless, crypto traders and investors may also lose their investment due to bad investment decisions. The time frame evaluated for the purpose of this paper is from December 7, 2019, to December 7, 2020. This is the period in which Covid-19 was beginning to affect the crypto market in early 2020 whereas December 2020 was when the Covid-19 vaccine was introduced and started to be distributed to people.

Bitcoin (BTC), the leading digital currency by market capitalization [5]. Within the blockchain industry, the term market capitalization (or market cap) refers to a metric that measures the relative size of a cryptocurrency. Market capitalisation is an indicator that measures and keeps track of the market value of a cryptocurrency. It is calculated by multiplying the current market price of a particular cryptocurrency with the total number of coins in circulation. Thus, market capitalization is directly correlated with cryptocurrency market prices [6]. 

Bitcoin's most unique benefit derives from the fact that it was the very first cryptocurrency to emerge on the market. The total supply of Bitcoin is limited by its algorithms and can never reach 21,000,000 coins. Bitcoin is by far the most demanded crypto, nearly interchangeable with any other cryptocurrencies. Bitcoin can be acquired by using any crypto exchange, both for fiat money and other cryptocurrencies (CoinMarketCap,2021).

According to Figure 1 and Figure 2, the price for 1 BTC on December 7, 2019, was priced at $7,568.59 and the market cap was valued at $136,903,506,086.12. The biggest drop BTC has witnessed was in March 16, 2020 priced at $5057.13 per BTC and market cap was valued at $92,410,203,014.87. The identified reason for this drop was that, in March 2020, Covid-19 was starting to affect many more people as it has spread throughout many countries. The drop must have been caused by a knee-jerk reaction among the traders due to the pandemic. Uncertainties of the virus caused fear and doubt as people were spreading misleading information that caused the BTC price to decline sharply. Such a big drop in BTC price attracted new investors looking for safe investment medium for their money. This also provided a great chance for traders to buy BTC at a lower price and increase their chances of generating gain as seen by the rise of the graph shortly after the fall. 

BTC showed a steady price throughout the months that follows after Covid-19 hit. The price started to increase gradually by the end of October 2020. On November 24, 2020, high market cap price can be observed at $358,018,464,111.28 and price per BTC was $19,297.17. The sharp price increase for BTC from end of October to November 24,2020 had not been seen since the cryptocurrency boom period in the year 2017 and early 2018. Interestingly, during that month, vaccine has been invented for mass production and the highly controversial election was held in the United States involving President Trump. The uncertainty created by the pandemic and the political scenes in America have contributed to making the price to skyrocket higher than it has for the past months. When it was announced that Joe Biden to become the next President of the USA and the vaccine for Coronavirus would be made available in 2021, financial markets around the world rallied with global shares reaching record highs.

However, a sharp drop was recorded on November 26, 2020, closing at $16,929.14 per BTC and market cap valued at $314,115,576,976.52. As seen on the graph, by the end of the year, the price rose to the same price as it was a month before. Coincidentally, the temporary drop was presumably due to the United States violent political scenes as Trump supporters rioted protesting the result of the American election. Bitcoin price experienced another spike in early 2021, rising more than 700 percent since March 2020 and rising beyond the $40,000 mark on January 7, 2021, for the first time. 

The explanation for investors' renewed confidence in cryptocurrency has to do with who is investing. Individual investors who believed in the technology's future and value drove up Bitcoin's price in 2017. Back in 2017, Bitcoin was not a credible investment at the time. It was not backed by any assets or a government and as a result investment comes with significant risk due to lack of mainstream acceptance. On the hand, the ascent of Bitcoin in the late 2020 and early 2021 was fuelled by institutional investment. The bull market was driven by large hedge funds and publicly traded firms, which do not have the same reputational risk appetite as regular investors. Square and PayPal have both incorporated cryptocurrency to their offering. The mainstream financial media was paying attention to cryptocurrency and reporting it on a daily basis. 

Figure 1: Bitcoin Market Price December 7, 2019 – December 7, 2020

Figure 2: Bitcoin Market Capitalization December 7, 2019 – December 7, 2020

Figure 3: Ethereum Market Price December 7, 2019 – December 7, 2020

All the attention was not dismissive, but rather a serious matter. The presence of such significant entities in the Crypto realm lends it the necessary legitimacy. This is a new beginning of digital currency's popular acceptance and in the next years, this market will harden into its appropriate shape. Covid-19-affected environment is the key factor that make institutional investors becoming more interested in Bitcoin. Countries have had to expand debt in order to maintain the financial burden of closed economies and limited output. When it comes to patterns of invested capital, Covid-19 has entirely transformed the game. Crypto is being used by governments and corporations to hedge their assets like never before. As the purchase power of the dollar and other fiat currencies began to rapidly decline, this resulted in inflation, prompting investors to seek out ways to hedge against it.

Ethereum (ETH) is the second largest cryptocurrency right after Bitcoin. Ethereum was first mentioned in a 2013 whitepaper by Vitalik Buterin. Buterin, along with other co-founders, raised financing for the project from the public in the summer of 2014 and publicly launched the blockchain on July 30, 2015. It is a decentralised open source blockchain technology with its own cryptocurrency, ETH serves as a platform for multiple other cryptocurrencies, including for the development of decentralised smart contracts. Ethereum is protected via the Ethash proof-of-work algorithm. ETH allows the creations of crypto tokens easily by using the smart contract features. Crypto tokens are non-mineable providing simpler ecosystem for creating new cryptos (CoinMarketCap,2021).

Referring to the Figure 3 and Figure 4 above, the Ethereum market was showing low volatility for the period between December 2019 to February 2020. The price was increasing steadily until gradually drop in March 2020 with the lowest price recorded on March 28,2020 with price at $128.94 per coin and market cap at $14,220,262,355.09. Similar to BTC, the justifiable reason for this drop was because Covid-19 pandemic was starting to make an impact. In contrast to Bitcoin, Ethereum drop was relatively low. The Ethereum market was then showing low volatility untill end of July. In August 2020, Ethereum price was showing high volatility but in an upward trend throughout the months until it reached its peak on September 1, 2020, where the price reached $482.3 per coin and market cap valued at $54,222,211,275.08. 

The sudden spike could be linked to the political events that were happening in the United States as Donald Trump and Joe Biden had their first debate and also due to BLM (Black Lives Matter) protests. The instability in the political and economic in the United States affected the confidence in the US dollar, therefore making demand for cryptocurrency to increase. Once the price skyrocketed, the graph declined rapidly in the next few days due to major sell-off of Ethereum during the price hike. During major sell-off, the cryptocurrency may decline abruptly despite the peak beforehand. Long-term value investors might call these lower prices a buying opportunity. 

Figure 4: Ethereum Market capitalization December 7, 2019 – December 7, 2020

Figure 5: Tether Market Price December 7, 2019 – December 7, 2020

The highest price for Ethereum during the period was recorded on December 3, 2020, at $618.03 and market cap valued at $70,258,468,430.06. Ethereum was following the bitcoin bull cycle in the late 2020 and early 2021. Similar to bitcoin, the cycle was driven by institutional investments including financial companies and large corporations. Ethereum increasing price was also driven by announcement of exciting updates that are supposed to fix Ethereum scalability issues, thus making the currency even more competitive.

Tether (USDT) is a stable value cryptocurrency issued by Tether, a Hong Kong-based firm, which represents the price of the US dollar. Tether was originally introduced in July 2014 as Real coin, a second-layer cryptocurrency token developed by the use of the Omni network on top of Bitcoin's blockchain. It was later changed to UST ether and then, eventually, to USDT. The unique feature of USDT is the fact that Tether ensures its value to remain fixed to the US dollar. USDT is a secure refuge for crypto investors as they can park their portfolios in Tether through times of extreme instability without needing to cash out entirely through US dollar (CoinMarketCap,2021).

Figure 5 and Figure 6 above provides a snapshot of USDT trading during the period. The USDT was showing low volatility throughout first quarter of the period. On March 13, 2020, the price took a sharp rise by $1.0009 per coin and market cap was valued at $4,646,380,338.51. Since USDT is supposed to represent the US dollar, the sharp rise may have been caused by the sudden attack of Covid-19 in the US. On that particular date, US President Donald Trump declares a national emergency, freeing up $50 billion to fight COVID-19. This creates sudden increase in demand for cryptocurrencies including USDT as people are looking for alternative investment portfolio.

However, when Covid-19 hit the world in mid-March 2020, the price dropped to $0.974248 and market cap was valued at $4,531,625,713. This is due to the USDT built-in price correction algorithm. A few days after the drop, the price of USDT increased slightly by $1.003193 and market cap was valued at $4,657,190,926. Then, throughout the months until December 2020, the market was showing stable price changes.

Dash is an open source blockchain and cryptocurrency focusing on providing a fast, low-cost global payments network of a decentralised nature. Dash name comes from "digital cash," was launched in January 2014 as a fork of Litecoin (LTC).

Figure 6: Tether Market Capitalization December 7, 2019 – December 7, 2020

Figure 7: Dash Market Price December 7, 2019 – December 7, 2020

Figure 8: Dash Market Capitalization December 7, 2019 – December 7, 2020

According to the project's whitepaper, Dash aims to strengthen BTC technology through ensuring greater privacy and quicker transfers. Dash's mission is "to be the most user-friendly and accessible payments-focused cryptocurrency in the world”. Dash relies on a network of Master Nodes, which are servers backed by collateral held in Dash that are designed to provide advanced services securely and governance over Dash’s system. It has a circulating supply of 10,147,523 coins and a maximum supply of 18,900,000 DASH coins (CoinMarketCap, 2021).

Based on Graph 7 and Graph 8, Dash showed a spike in January 2020 of more than 100% from the price a month before. The spike reached its peak on January 16, 2020, at the price of $132.272945 and market cap of $1,226,142,431. Interestingly, the price chart for Dash did not exactly follow Bitcoin for the period depicted. This could be due the events happening within the community and also the state of the technology. Among others, Dash is well-known for its spread in Latin America. Dash is also known for being payments-focused cryptocurrency. Any events that hinder conventional payment transactions during the period could led to the spike of usage and the Dash price. 

Specifically, in the huge Latin America region, Nicholar Maduro of Venezuela staged a “parliamentary coup” by using security forces to bar the opposition leader from entering the National Assembly to be voted as the new president. This reveals the regime's plan to dismantle the country's only legitimate body from its constitutional powers. In Colombia, Ecuador, Bolivia and Chile, there have been violent protests and social unrests. As reported by International IDEA, these recent examples illustrate that democracy in Latin America is at a crossroad [7].

In other part of the world, there were also natural disaster and national-level conflicts being reported. There were flooding in Indonesia, political shake-up in Russia in which Russian President Vladimir Putin's long-term ally, former Prime Minister Dmitry Medvedev, abruptly resigned on mid-January 2020, earthquakes in Turkey on January 24, UK finalizes their Brexit decision by January 31 and conflicts in the Middle East. These disasters and conflicts contributed to reduction of people confidence in fiat currencies and turned to cryptocurrencies, pushing up the prices. Dash market continued to be volatile and fluctuated wildly throughout January 2020 until March 2020. 

Due to the global pandemic and an economic turmoil, by March 2020, Dash did not manage to keep its performance. In March 2020, the Dash market recorded a declining trend with the lowest at $43.21 per coin and market cap of $405,470,308 on March 16, 2020. These declines were due to Covid-19 pandemic that hit the world population. It caused fear, doubt and uncertainties among cryptocurrency traders which then affected the market directly. Then, the price rose again after the politics and economy situations stabilised. The market continued to be volatile until a sharp rise in November 2020. On November 24th, 2020, Dash market reached its peak with $119.7 per coin and market cap of $1,176,527,305.77. This sharp rise is in line with the covid-19 pandemic that was still ravaging the world at the time.

Factors Affecting Cryptocurrency Market

Cryptocurrency prices are driven by various factors which hold vital insights over the cryptocurrency value. One of the main factors that affect cryptocurrency prices is system continuous updates and community support. Cryptocurrencies are constantly changing with new features being added frequently to improve the performance of the cryptocurrency and enhance the adoption of decentralised finance globally. For example, Bitcoin has been updated with lightning network layer to facilitate transactions and Ethereum on-going transitioning to Ethereum 2.0 which is essentially a proof-of-work algorithm to proof-of-stake. These new improvements build positive expectation and build confidence among investors toward the cryptocurrencies. New announcements can also affect the price of a cryptocurrency, but what matters the most is when those changes are finally implemented and usable. If announced changes are not possible or do not work, this can result in investors losing faith in the project.

Just like other investments, the cryptocurrency market is also affected by financial and economic crises, health concerns and social turmoil. In fact, economic crises have strong direct impact on crypto prices. As traditional financial systems collapse, people may become panic and invest in alternative assets. The more people invest in crypto, the larger its capitalisation. When investors lose confidence not only in fiat money but the governments, they many may turn to the crypto market, which will push up prices even further. Some even claim that despite the high volatility levels in the crypto sector, cryptocurrencies may outperform gold as a safe haven asset. Other than that, cryptocurrencies behave like traditional assets at the beginning of COVID-19 pandemic, but they start to become a hedge as the effect of the COVID-19 deepens. During this pandemic, governments are imposing more restrictions as the number of reported cases and deaths rises and these restrictions are likely to raise demand for non-traditional assets. Bitcoin and blockchain technology have the potential to mitigate some of the challenges that have arisen as a result of the pandemic's new realities [8]. Apart from health crisis, political issue also affects the cryptocurrency market. According to Ajmi and Arfaoui, [9], when the political situation worsens after an election, the quantiles plots demonstrate that an increase in the political risk index leads to a considerable increase in Bitcoin return, while Bitcoin volatility remains consistent. As a result, Bitcoin can be used as a hedging strategy if the political situation worsens.

Cryptocurrencies are decentralized and mostly not linked to any particular central government (except for those issued by central governments). Regulations imposed by governments of significant markets would have direct effect on the prices. These can be seen a number of times whenever news released by central government pertaining to cryptocurrency would affect the prices. News like threat of imprisonment for those conducting token offering would create negative consequence to cryptocurrency prices. In 2018, the Malaysian Minister of Finance issued such threat of up to 10 years imprisonment for those involve in cryptocurrency token offering. Such regulation has since been amended to more open approach towards cryptocurrency related activities. The USA and China are two of the most influential players when it comes to crypto regulation. The USA are due to its influence in the world economy and most countries will adopt and adapt its policies while China because there are many Chinese investors involved in cryptocurrency trading. Essentially, if there are negative public opinions on any government statements or decisions, the prices of cryptocurrencies can fall.

The rate of user adoption is often seen as the most important factor that cryptocurrency needs in order to move forward and replace fiat currency. With the growing popularity of currencies, it is possible that prices will rise above the current rate. On the other hand, a decrease in currency demand might result in a decrease in price. Many people are switching to the cryptocurrency such as Bitcoin, which is outstanding online trade currency. Many individuals, corporations and investors have begun to use Bitcoin for conducting online transactions. Given the widespread adoption of Bitcoin, it is reasonable to expect Bitcoin price to rise in the near future [10].

Market sentiment is another important factor that can help a cryptocurrency to establish its dominance. Market sentiment refers to the overall attitude of investors toward an asset or a market. It’s also the crowd psychology surrounding a given investment. While some coins have caused controversy worldwide, there are many coins with promising features that are becoming more and more popular, with prices increasing despite the ongoing pandemic. Meanwhile, hacking and fraud are still a problem for crypto investors. This is not a good thing to happen as cryptocurrency is supposed to be more secure when compared to regular transactions and when this fails, people realise the crypto market might not be as secure as imagined. Finally, there is the supply and demand. Supply and demand are a crucial principle in the financial sector, particularly in crypto investing. This is a straightforward factor to look out for as it will affects anything that are traded whether it is stocks, forex, or crypto. The value will increase when it is in short supply and if there is an abundance of something, the value is likely to decrease. The effect of supply and demand on inflation and deflation is significant.

Cryptocurrencies prices are more likely to increase when demand for fiat money of the world decline due to political, health or financial crises. The main reason of this phenomenon is because people trust toward fiat money decline when there are global-scale crises. People will start to move their money into more secure investments. People are inclined to make huge profits from buying cryptocurrencies at their initial offerings when the price is low and sell them when the price is higher or, just simply invest big on the crypto and expect long-term capital gains. The similar patterns can be observed from three well-known cryptocurrencies in the market: Bitcoin (BTC), Ethereum (ETH) and Dash. These three cryptocurrencies showed similar decline when the Covid-19 hit the world and increase a few days after Covid-19 finally set in. This is because, traders are fed with misleading information and insecurities of the market which then turned into fear, uncertainties and doubts of the market. But, once they are familiar with Covid-19, they started to feel comfortable at trading and would want to hold onto their investments in crypto market which then marked the sudden spike increase in the market. Apart from that, between December 7, 2019, to December 7, 2020, several conflicts and disasters had occurred around the world, which have caused fiat money demand to decline tremendously and cryptocurrencies’ prices to rise above normal. This paper concludes into a rather simple statement that cryptocurrency prices can be predicted to increase during crises as direct consequences of increased trading volume and lower demand toward fiat money.

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