Modeling the Potential Impact of Government Regulation on Cryptocurrency Prices

Kylie LoPiccolo and Francis Parisi
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Kylie LoPiccolo: Department of Information Technology, Pace University, New York, USA
Francis Parisi: Department of Computer Science, Pace University, New York, USA

Economic Analysis Letters, 2023, vol. 2, issue 3, 10-17

Abstract: Cryptocurrencies have gained popularity over the past five to six years. Most recently, events like the FTX bankruptcy fueled the interest in regulation. Moreover, it is possible that the FTX event disrupting the cryptocurrency market was a factor in Silicon Valley Bank's failure. While several countries consider regulation, from soft regulation, like Japan, to more rigid standards, like the total ban in China, we study the effect of other news or events on cryptocurrency prices. This paper looks at historical closing prices for Bitcoin, the largest of the cryptocurrencies, and how prices react to various events. Then we focus on modeling the time series considering an 'event,' China's ban on cryptocurrency exchanges, using intervention analysis. We find that intervention analysis provides a reliable approach to quantifying the impact regulation may have on cryptocurrency pricing.

Keywords: Time-series models; Intervention analysis; Government policy and regulation; Asset pricing (search for similar items in EconPapers)
Date: 2023
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