Bubbles and Crashes in Cryptocurrencies: Interdependence, Contagion, or Asset Rotation?

Chowdhury, M.; Damianov, D.S.; Elsayed, A.H.

Abstract

Using a quantile vector autoregressive model to capture return dynamics in extreme market conditions, we find that the cryptocurrency market exhibits a high level of market connectedness. Bitcoin is a net transmitter of return spillovers during busts and a net receiver during booms. Analysis of the timing of bubble and crash periods uncovers the presence of interdependence and contagion effects. Asset dynamics is driven to a great extent by the technology, in particular the consensus protocol of cryptocurrencies. There is only limited evidence for asset rotation, and it involves mostly Ripple.

Citation

Chowdhury, M., Damianov, D., & Elsayed, A. (2022). Bubbles and Crashes in Cryptocurrencies: Interdependence, Contagion, or Asset Rotation?. Finance Research Letters, 46(Part B), Article 102494. https://doi.org/10.1016/j.frl.2021.102494

• Journal Article Type: Article
• Acceptance Date: Oct 10, 2021
• Online Publication Date: Oct 11, 2021
• Publication Date: 2022-05
• Deposit Date: Oct 13, 2021
• Publicly Available Date: Oct 11, 2022
• Journal: Finance Research Letters
• Print ISSN: 1544-6123
• Electronic ISSN: 1544-6131
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 46
• Issue: Part B
• Article Number: 102494
• DOI: https://doi.org/10.1016/j.frl.2021.102494
• Public URL: https://durham-repository.worktribe.com/output/1227951