When the blockchain does not block: on hackings and uncertainty in the cryptocurrency market

Klaus Grobys

Quantitative Finance, 2021, vol. 21, issue 8, 1267-1279

Abstract: A total of 1.1 million bitcoins were stolen in the 2013–2017 period. Noting that the average price for a Bitcoin in 2018 was $7572 the corresponding monetary equivalent of losses is $8.9 billion highlighting the societal impact of this criminal activity. Investigating the response of the uncertainty of Bitcoin returns when hacking incidents occur, the results of this study point toward two different responses. After experiencing a contemporaneous effect at day $t = 0 $t=0, the volatility increases significantly again at day $t + 5 $t+5. Hacking incidents that occur in the Bitcoin market also affect the uncertainty in the Ethereum market with a time delay of five days. Notably, neither Bitcoin nor Ethereum appear to exhibit asymmetric responses to negative innovations.

Date: 2021
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DOI: 10.1080/14697688.2020.1849779

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