The collapse of the FTX exchange: The end of cryptocurrency's age of innocence

Conlon, Thomas; Corbet, Shaen; Hu, Yang

doi:10.1016/j.bar.2023.101277

Cited by 9 publications

(1 citation statement)

References 30 publications

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“…During the collapse of FTX, interaction effects also became notably evident on important dates, attributable to two tokens established by the exchange and associated firms, specifically the FTT Token and Serum SRM (Akyildirim et al, 2023). Conlon et al (2022), focusing on balance sheet imbalances and contagion effects, evidenced that FTX's risk and liquidity situation, particularly in connection to the privately issued cryptocurrencies Serum and FTT, was directly related to the fall of FTX and subsequent contagion effects. Furthermore, Jalan and Matkovskyy (2023) examined the impact of recent crises in the cryptocurrency market, specifically the collapse of FTX and Terra, on systemic risks and liquidity.…”

Section: Literature Reviewmentioning

confidence: 99%

FTX fiasco and global equity markets: evidence from event study approach

Goyal,

Soni

2023

JFEP

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Purpose This study aims to investigate the impact of FTX bankruptcy on the global stock markets, including both the developed and emerging markets, as per the Morgan Stanley Capital Investment (MSCI) country classification. Design/methodology/approach Using the daily closing prices for leading stock market indices of all 47 countries in the MSCI market classification, comprising 23 developed markets and 24 emerging markets, the event study methodology is used to examine the impact of the event on developed markets, emerging markets and overall global equity markets. Findings The study finds heterogeneous effects of the event on different countries. Results indicate that overall global equity markets experienced a statistically significant positive cumulative average abnormal returns of 15.8533% in the complete event window of 28 days from t − 7 to t + 20. The authors conclude that traditional global equity markets can be used as a hedge against potential financial risk posed by unfavorable events in the cryptocurrency markets and have safe haven properties. Practical implications The study emphasizes the global financial system’s interconnectedness and the potential of traditional equity markets to hedge risks in the cryptocurrency market. The findings are relevant for investors seeking portfolio diversification and mitigating their exposure to potential risks in the cryptocurrency market. Originality/value To the best of the authors’ knowledge, the present study is the earliest attempt to comprehensively examine the impact of the bankruptcy of the world’s fourth largest cryptocurrency exchange, FTX, on the global equity markets.

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Section: Literature Reviewmentioning

confidence: 99%

FTX fiasco and global equity markets: evidence from event study approach

Goyal,

Soni

2023

JFEP

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Investor Sentiment, Unexpected Inflation, and Bitcoin Basis Risk

Conlon,

Corbet,

Oxley

2024

Journal of Futures Markets

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The introduction of regulated CME futures contracts on Bitcoin in 2017 raised an expectation that cryptocurrencies would become part of mainstream financial markets. This also heightened links between traditional markets and Bitcoin, implying that the cryptocurrency would be subject to systematic spillovers. This paper uses high‐frequency data to examine whether Bitcoin basis risk is linked to investor sentiment from established financial markets. Our findings indicate that extreme investor sentiment, as reflected by the tail risk in various volatility indices, including the VIX, consistently correlates with a negative Bitcoin basis, where Bitcoin futures prices are lower than spot prices. Fluctuations significantly influence this relationship in the trading volume of Bitcoin futures and are more pronounced during periods of substantial unexpected inflation and deflation. These results underline the complex dynamics between market sentiment and cryptocurrency pricing, offering insights with substantial implications for investors and policymakers.

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Evaluating the dynamic connectedness of financial assets and bank indices during black-swan events: A Quantile-VAR approach

Kyriazis,

Corbet

2024

Energy Economics

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The collapse of the FTX exchange: The end of cryptocurrency's age of innocence

Cited by 9 publications

References 30 publications

FTX fiasco and global equity markets: evidence from event study approach

FTX fiasco and global equity markets: evidence from event study approach

Investor Sentiment, Unexpected Inflation, and Bitcoin Basis Risk

Evaluating the dynamic connectedness of financial assets and bank indices during black-swan events: A Quantile-VAR approach

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