Has Coronavirus Affected Bitcoin Price?

We analyzed COVID-19 data and Pearson correlation coefficient between Bitcoin prices.

Of course, we understand that correlation does not prove causation. We also discuss this issue below.

Pearson's correlation coefficient measures how closely the changes in two values are related over time. A score of 1 indicates a perfect positive correlation (both variables rise or fall in tandem), and a score of -1 indicates a perfect negative correlation (when one rises, the other falls).

As expected, the two values with the strongest correlation in our analysis were the number of new confirmed COVID-19 cases and new deaths worldwide, with a score of 0.87 , showing a very strong positive correlation. But there is also a very strong correlation between the price of Bitcoin and the number of new cases (0.8) and new deaths (0.76).

Volume (at least on the Gpini exchange) vs confirmed cases (0.08) or deaths (0.15 ) are not very relevant. There is a strong correlation between the number of daily active addresses and the number of daily new cases (0.78) and deaths (0.77). In fact, the correlation ratio between the number of Bitcoin active addresses and the number of confirmed cases and deaths of the new crown is higher than that of BTC< The /span> price correlation is even stronger (0.66)!

Except for a moderate correlation (0.56) with the number of active addresses, there is no strong correlation between daily trading volume and other data.

So, what does all this mean? As we mentioned earlier, just because some of these values are correlated doesn't mean they actually influence each other. The correlation could be a coincidence. And in less than a year of data, coincidences are certainly possible. There are also factors that make it more likely that these correlations are just a coincidence, such as trading activity and the number of new crown cases both tend to fall over the weekend. This increases the correlation score, but it may just be that many people (including the labs responsible for the new crown testing and crypto traders) often have weekends off.

However, it is also possible that this relationship is real, and in a time of unprecedented global uncertainty, investing< /span> Investors hope to use Bitcoin to store part of their assets. Several academic studies have shown that the price of Bitcoin is affected by political and economic uncertainty, although the correlation is not always positive.

The confirmed cases of the new crown and the price of Bitcoin do seem to have risen sharply at almost the same time. In 2021, the five days with the highest single-day increase in the number of confirmed cases of the new crown are: January 6, January 7, January 8, January 9, and January 15.

What about Bitcoin? They are January 6th, January 7th, January 8th, January 9th, and January 14th.

While the charts give the impression that January's surge was the only relevant moment for prices, the data tells a different story. Even if we remove all the data for 2021 and only look at the data for 2020, Bitcoin price is still closely correlated with the number of new crown cases per day (0.85). Compared with the price of Bitcoin (0.62), the number of active Bitcoin addresses is more closely correlated with the number of new crown diagnoses (0.72). In other words, nothing changes.

So, are bitcoin investors reacting to the deluge of new crown data we all face every day? Or at least in part? No one can be 100% sure. But with the limited data we have so far, we can say with certainty that the numbers are closely correlated to suggest that this is a real possibility.

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