Understanding digital bubbles amidst the COVID-19 pandemic: Evidence from DeFi and NFTs

Youcef Maouchi, Lanouar Charfeddine and Ghassen El Montasser

Finance Research Letters, 2022, vol. 47, issue PA

Abstract: This paper investigates digital financial bubbles amidst the COVID-19 pandemic. Using a sample of 9 DeFi tokens, 3 NFTs, Bitcoin, and Ethereum, we detect several bubbles overlapping the examined cryptoassets. We also uncover DeFi and NFT-specific bubbles in Summer 2020 suggesting distinct driving factors for this class of assets. We document that DeFi and NFTs bubbles are less recurrent but have higher magnitudes than cryptocurrencies’ bubbles. We also find that COVID-19 and trading volume exacerbate bubble occurrences, while Total Value Locked (TVL) is negatively associated with cryptoassets’ bubbles. Our results suggest that TVL can be used as a tool for market monitoring.

Keywords: COVID-19; DeFi; NFTs; Total Value Locked; Digital bubbles; Real-time detection (search for similar items in EconPapers)
JEL-codes: C58 G01 G41 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321005341

DOI: 10.1016/j.frl.2021.102584

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