Information Flow in the FTX Bankruptcy: A Network Approach

Riccardo De Blasis, Luca Galati, Rosanna Grassi and Giorgio Rizzini

Papers from arXiv.org

Abstract: This paper investigates the cryptocurrency network of the FTX exchange during the collapse of its native token, FTT, to understand how network structures adapt to significant financial disruptions, by exploiting vertex centrality measures. Using proprietary data on the transactional relationships between various cryptocurrencies, we construct the filtered correlation matrix to identify the most significant relations in the FTX and Binance markets. By using suitable centrality measures - closeness and information centrality - we assess network stability during FTX's bankruptcy. The findings document the appropriateness of such vertex centralities in understanding the resilience and vulnerabilities of financial networks. By tracking the changes in centrality values before and during the FTX crisis, this study provides useful insights into the structural dynamics of the cryptocurrency market. Results reveal how different cryptocurrencies experienced shifts in their network roles due to the crisis. Moreover, our findings highlight the interconnectedness of cryptocurrency markets and how the failure of a single entity can lead to widespread repercussions that destabilize other nodes of the network.

Date: 2024-07
New Economics Papers: this item is included in nep-net and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2407.12683 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2407.12683

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().