Islamic, Green, and Conventional Cryptocurrency Market Efficiency During the Covid-19 Pandemic

Abstract

Unlike conventional cryptocurrencies, Islamic ones are new technologies backed by tangible assets and are characterised by their fundamental values. After the COVID-19 outbreak, cryptocurrency responses have shown different behaviour to stock market reactions. However, there is a lack of studies on the efficiency of Islamic and green cryptocurrencies during the pandemic. This paper attempts to analyse the behaviour of three typical families of cryptocurrencies (conventional, Islamic, and green) extracted according to their availability in daily frequencies during COVID-19. For this purpose, their efficiency levels are studied before and after the outbreak by employing multifractal detrended fluctuation analysis (MFDFA) to make the best predictions and strategies. The inefficiency of the cryptocurrencies is assessed through a magnitude of long-memory (MLM) efficiency index, and the impact of COVID-19 on their efficiency is evaluated. The primary results show that HelloGold was the most efficient market before the COVID-19 outbreak and that subsequently Ethereum has been the mostefficient. In addition, the findings reveal that the cryptocurrency reactions are not similar and show more resilience in the Ethereum and Litecoin markets than in other cryptocurrency markets. The main contribution of this study is the evaluation of the impact of COVID-19 on the various classes of crypto money. This work has practical implications, as it provides new insights into trading opportunities and market reactions. Moreover, he work has theoretical implications based on its evaluation of three distinct models from different doctrine viewpoints.

The co‐movements of faith‐based cryptocurrencies in periods of pandemics

“…The Islamic cryptocurrency X8X seems to have a weak response to the news expressing the fast COVID‐19 spread in the world. These results are in line with previous works that justified the effect of COVID‐19 on the Islamic markets (Mnif & Jarboui, 2021; Sherif, 2020). However, the sensitivity of Bitcoin is more observed than the Islamic cryptocurrency reaction implying more persistence and resilience in Islamic markets in such a crisis.…”

“…However, the sensitivity of Bitcoin is more observed than the Islamic cryptocurrency reaction implying more persistence and resilience in Islamic markets in such a crisis. These findings align with the literature demonstrating the superiority of tangible backed assets on speculative assets (D. Ashraf et al, 2020; Mnif & Jarboui, 2021). Besides, the results in Figure 6 show that all of the cryptocurrency kinds are inter‐correlated, especially in the short and medium horizons.…”

“…Therefore, the justified interdependence between Islamic cryptocurrency markets and the COVID‐19 pandemic is acceptable and follows general expectations. Overall, our results align with the pioneer studies on cryptocurrency responses during the COVID‐19 pandemic through various time scales (Conlon et al, 2020; Goodell & Goutte, 2020; Mnif & Jarboui, 2021; Sherif, 2020).…”

“…Mnif and Jarboui (2021) compared the reaction of three families of cryptocurrencies and revealed that faith‐based markets are more efficient before the COVID‐19 pandemic than their counterparts. As a part of this last strand, this work investigates the response of Islamic cryptocurrencies and their co‐movements with Bitcoin and pandemic indicators.…”

Does bank governance affect risk and efficiency? Evidence from Islamic banks in GCC countries

“…Efficiency measures have several advantages over traditional performance indicators (ROE, ROA, Tobin’s Q,[..]). Efficient frontier approaches have the ability to provide an overall objective numerical score and ranking, a proxy for efficiency in accordance with an economic optimization mechanism (Tanna et al , 2011; Mnif and Jarboui, 2021). In addition, unlike other performance indicators, for efficiency measures, we simultaneously take into account more than one input and one output of a bank.…”