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The crypto collapse chronicles: Decoding cryptocurrency exchange defaults

Niranjan Sapkota

Journal of International Financial Markets, Institutions and Money, 2025, vol. 99, issue C

Abstract: This research explores the factors contributing to the failure of cryptocurrency exchanges by analyzing a sample of 845 exchanges. Using logit and probit models, it identifies key variables affecting cryptocurrency exchange defaults. The results show that cryptocurrency exchanges that are centralized, located in countries with high transparency indices, and offer fewer peer cryptocurrencies are more likely to default. Additionally, exchanges that impose high withdrawal fees and have no restrictions on clients from the United States are also positively associated with defaults. Moreover, the absence of referral schemes and having lower ratings each contributes marginally to defaults. Machine learning (ML) models including random forest, support vector machine, stacked ensemble confirm the robustness and high predictability of cryptocurrency exchange defaults.

Keywords: Cryptocurrency exchange; Defaults; Logit; Probit; Machine learning (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 G17 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:99:y:2025:i:c:s1042443124001598

DOI: 10.1016/j.intfin.2024.102093

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Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

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