COVID-19 Cryptocurrency Investment: Wealth Disparities and Portfolio Diversification

Area of Science:

• * Financial Economics
• * Behavioral Finance
• * Cryptocurrency Markets

Background:

• * Cryptocurrency and blockchain technology offer new avenues for investment and wealth accumulation.
• * High cryptocurrency returns during the COVID-19 pandemic incentivized diverse ethnic groups to participate.
• * Cryptocurrency is viewed as a potential hedging instrument for wealth across racial groups.

Purpose of the Study:

• * To assess the extent to which blockchain serves as an effective hedging instrument for minority investors.
• * To examine cryptocurrency investment strategies across different racial/ethnic groups during the pandemic.
• * To determine if public coins like Bitcoin and Ethereum should be part of investment portfolios during health crises.

Main Methods:

• * Utilized weekly trade price data from Yahoo Finance.
• * Incorporated market valuations from coinranking.com.
• * Employed a panel data model (2019-2021) analyzing asset/equity variables from the Federal Reserve Bank.

Main Results:

• * An increase in the price of Bitcoin and other cryptocurrencies during the pandemic was observed.
• * This price increase may negatively impact investment strategies for marginalized groups.
• * Findings suggest potential limitations in cryptocurrency as a hedging tool for certain demographics.

Conclusions:

• * While cryptocurrency offers investment potential, its role as a hedging instrument for minority investors requires careful consideration.
• * The study highlights that rising cryptocurrency prices might disadvantage marginalized investors during economic downturns like the pandemic.
• * Further research is needed to fully understand the implications of cryptocurrency investments for diverse investor groups.