Possible Impact of Facebook’s Libra on Volatility of Bitcoin: Evidence from Initial Coin Offer Funding Data

Senarathne Chamil W. ()
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Senarathne Chamil W.: MBA (Finance), B.Sc. (Sp.), ACA, ACMA, CGMA, PhD student at School of Economics, Wuhan University of Technology. 122 Luoshi Road, Wuhan, Hubei, 430070, P. R. China. Phone: +86 13247196983.

Management of Organizations: Systematic Research, 2019, vol. 81, issue 1, 87-100

Abstract: This paper examines the impact of Libra on volatility of Bitcoin using the classical framework of C. G. Lamoureux and W. D. Lastrapes (1990). ARCH and GARCH effects disappear when lagged ICO funding size is included in the variance equation. A negative association between volatility and funding size and the disappearance of volatility persistence (long-term volatility effect) suggest that Libra, as a dominant new currency, is likely to stabilize the cryptocurrency market and enhance potential for currency diversification. Furthermore, it is revealed that the stability cannot be ensured merely by backing decentralized blockchain instruments, such as Bitcoin, with bank deposits, government securities or exchange rate.

Keywords: bitcoin; cryptocurrency; Facebook’s Libra; ICO funding size; GARCH (1; 1); ARCH and GARCH effects (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:morgsr:v:81:y:2019:i:1:p:87-100:n:6

DOI: 10.1515/mosr-2019-0006

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