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FTX Collapse and systemic risk spillovers from FTX Token to major cryptocurrencies

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  • Bouri, Elie
  • Kamal, Elham
  • Kinateder, Harald

Abstract

We examine the dynamic lower tail dependence and downside risk spillover between the FTX Token and seven major cryptocurrencies using Rotated Gumbel copula and GARCH copula quantile regression-based ∆CoVaR models. Daily data is analyzed from May 1, 2020 to December 31, 2022. The results show a strong evidence of risk spillover effects from FTX Token to crypto markets. Solana, followed by Cardano, displays the largest downside risk spillover. Tether and Bitcoin are affected least by the FTX fallout, receiving the lowest downside risk spillovers. Furthermore, the dynamic risk spillover effects are heterogeneous over time and comparatively different for each cryptocurrency.

Suggested Citation

  • Bouri, Elie & Kamal, Elham & Kinateder, Harald, 2023. "FTX Collapse and systemic risk spillovers from FTX Token to major cryptocurrencies," Finance Research Letters, Elsevier, vol. 56(C).
    • Handle: RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323004713
    DOI: 10.1016/j.frl.2023.104099
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    Cited by:

    1. Lin, Xudong & Meng, Yiqun & Zhu, Hao, 2023. "How connected is the crypto market risk to investor sentiment?," Finance Research Letters, Elsevier, vol. 56(C).

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    More about this item

    Keywords

    FTX collapse; Cryptocurrencies; Downside risk spillover; ∆CoVaR; GARCH copula quantile regression;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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