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Cryptocurrency liquidity during the Russia–Ukraine war: the case of Bitcoin and Ethereum

Author

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  • Saliha Theiri
  • Ramzi Nekhili
  • Jahangir Sultan

Abstract

Purpose - This study examine the response of liquidity of Bitcoin and Ethereum to the Russia-Ukraine war in an event study context and investigate whether the war had a transitory or a permanent effect on cryptocurrency liquidity. Design/methodology/approach - A event study was applied to hourly transactions on Bitcoin and Ethereum cryptocurrencies from 1/02/2022 to 31/03/2022. This is period is subdivided in two sample periods to capture transitory and permanent effects. The transitory effect is investigated over a window spanning -20 and +20 days. For a more extended post-event period, a linear regression model was applied to analyze the effects of other factors on the liquidity risk of BTC and ETH. Findings - The findings reveal a significant but temporary impact of the Russia–Ukraine war on the liquidity of Bitcoin and Ethereum. Liquidity levels have increased within the first two days around the event day and then returned to the pre-event level after that. However, the response of BTC and ETH cryptocurrencies' liquidities to the Russian invasion of Ukraine is not uniform. Originality/value - This is the first paper that assesses the liquidity level of two major cryptocurrencies (Bitcoin and Ethereum) in response to an extreme event: the Russia–Ukraine war. The hypothesis is that trading in the cryptocurrency market will increase due to market participants' goal of evading regulatory sanctions. Furthermore, market participants may also take advantage of cryptocurrencies' popularity as safe-haven assets.

Suggested Citation

  • Saliha Theiri & Ramzi Nekhili & Jahangir Sultan, 2022. "Cryptocurrency liquidity during the Russia–Ukraine war: the case of Bitcoin and Ethereum," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 24(1), pages 59-71, October.
    • Handle: RePEc:eme:jrfpps:jrf-05-2022-0103
    DOI: 10.1108/JRF-05-2022-0103
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    Citations

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    Cited by:

    1. Muhammad Farrukh Shahzad & Shuo Xu & Weng Marc Lim & Muhammad Faisal Hasnain & Shahneela Nusrat, 2024. "Cryptocurrency awareness, acceptance, and adoption: the role of trust as a cornerstone," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-14, December.
    2. Mirza, Nawazish & Umar, Muhammad & Mangafic, Jasmina, 2023. "Covid-19 vaccines and investment performance: Evidence from equity funds in European Union," Finance Research Letters, Elsevier, vol. 53(C).
    3. Ustaoglu, Erkan, 2023. "Diversification, hedge, and safe-haven properties of gold and bitcoin with portfolio implications during the Russia–Ukraine war," Resources Policy, Elsevier, vol. 84(C).

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