Are DeFi tokens a separate asset class from conventional cryptocurrencies?

Shaen Corbet, John W. Goodell (), Samet Gunay () and Kerem Kaskaloglu ()
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John W. Goodell: The University of Akron
Samet Gunay: American University of the Middle East
Kerem Kaskaloglu: American University of the Middle East

Annals of Operations Research, 2023, vol. 322, issue 2, No 3, 609-630

Abstract: Abstract We test for the existence of bubbles in conventional and DeFi-focused cryptocurrencies, seeking to identify key driving forces that distinguish DeFi tokens from conventional cryptocurrencies. Utilising Generalized Supremum Augmented Dickey-Fuller tests, we identify the presence of significant bubbles across multiple markets, with relatively more stable price developments in DeFi-focused cryptocurrencies. Finally, DCC-GARCH and Diebold–Yilmaz spillover analyses of return and volatilities indicate that DeFi-focused cryptocurrencies possess stronger and more stable correlations with Ethereum than Bitcoin, and that neither cryptocurrency influenced a significant DeFi bubble formation that occurred during 2020. Results suggest that the DeFi market should be viewed as a separate asset class from conventional cryptocurrencies. Our findings provide important information for investors seeking additional diversification opportunities, as well as well as policymakers and regulatory authorities separating and better understanding these growing asset classes.

Keywords: Cryptocurrency; Decentralized finance tokens; Bubbles; Volatility spillovers (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (25)

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DOI: 10.1007/s10479-022-05150-z

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