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Was the ICO Boom just a Sideshow of the Bitcoin and Ether Momentum?

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  • Allen, Franklin
  • Fatás, Antonio
  • Weder di Mauro, Beatrice

Abstract

We investigate whether the market for ICOs in 2017-2018 showed signs of contagion from prices of the largest cryptocurrencies (Bitcoin and Ether). We find evidence that during phases of optimism, ICO daily returns display low correlations with those of Bitcoin or Ether. But when the bubble bursts, correlations jump to very high levels, signaling that the ICO market becomes a sideshow of the cryptocurrency dynamics. We show that the same dynamics were present in 2021 when Bitcoin and Ether went through a similar episode. We demonstrate that this high correlation was not present during the Nasdaq bubble in the 1990s, signaling that the price dynamics of digital tokens seems to be driven by a common factor, much more than in previous bubbles.

Suggested Citation

  • Allen, Franklin & Fatás, Antonio & Weder di Mauro, Beatrice, 2022. "Was the ICO Boom just a Sideshow of the Bitcoin and Ether Momentum?," CEPR Discussion Papers 16908, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16908
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    References listed on IDEAS

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    Cited by:

    1. Anton Miglo, 2022. "Choice between IEO and ICO: Speed vs. Liquidity vs. Risk," FinTech, MDPI, vol. 1(3), pages 1-18, September.

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    More about this item

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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