Same Returns, Different Risks: How Cryptocurrency Markets Process Infrastructure vs Regulatory Shocks

Murad Farzulla

Papers from arXiv.org

Abstract: We investigate whether cryptocurrency markets differentiate between infrastructure failures and regulatory enforcement at the return level, complementing a companion conditional variance analysis that finds 5.7 times larger volatility impacts from infrastructure events (p = 0.0008). Using event-level block bootstrap inference on 31 events across Bitcoin, Ethereum, Solana, and Cardano (2019-2025), we find no statistically significant difference in cumulative abnormal returns between infrastructure failures (-7.6%) and regulatory enforcement (-11.1%): the difference of +3.6 pp has p = 0.81 with 95% CI [-25.3%, +30.9%]. This null acquires substantive meaning alongside the companion's highly significant variance result: the same events that produce indistinguishable return responses generate dramatically different volatility signatures. Markets differentiate shock types through the risk channel -- the second moment -- rather than expected returns. The block bootstrap methodology, which resamples entire events to preserve cross-sectional correlation, reveals that prior parametric approaches systematically understate uncertainty by inflating degrees of freedom. Results are robust across eight specifications including permutation tests, leave-one-out analysis, and the Ibragimov-Mueller few-cluster test.

Date: 2026-02, Revised 2026-02
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