FTX Collapse and systemic risk spillovers from FTX Token to major cryptocurrencies

Elie Bouri, Elham Kamal and Harald Kinateder

Finance Research Letters, 2023, vol. 56, issue C

Abstract: We examine the dynamic lower tail dependence and downside risk spillover between the FTX Token and seven major cryptocurrencies using Rotated Gumbel copula and GARCH copula quantile regression-based ∆CoVaR models. Daily data is analyzed from May 1, 2020 to December 31, 2022. The results show a strong evidence of risk spillover effects from FTX Token to crypto markets. Solana, followed by Cardano, displays the largest downside risk spillover. Tether and Bitcoin are affected least by the FTX fallout, receiving the lowest downside risk spillovers. Furthermore, the dynamic risk spillover effects are heterogeneous over time and comparatively different for each cryptocurrency.

Keywords: FTX collapse; Cryptocurrencies; Downside risk spillover; ∆CoVaR; GARCH copula quantile regression (search for similar items in EconPapers)
JEL-codes: G23 G32 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323004713

DOI: 10.1016/j.frl.2023.104099

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