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Will memecoins’ surge trigger a crypto crash? Evidence from the connectedness between leading cryptocurrencies and memecoins

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  • Li, Chao
  • Yang, Haijun

Abstract

Understanding the crash of cryptocurrencies in 2021 requires analyses of the microstructure of leading cryptocurrencies and memecoins. Using 4-hourly data, we reveal how leading cryptocurrencies and memecoins influence each other with the Granger-causality test and dynamic connectedness. We find that leading cryptocurrencies spillovers dominate memecoins by falling while memecoins spillovers affect leading cryptocurrencies by rising. Moreover, we conduct regression analysis on a daily and 4-hourly basis, and the results confirm the findings above. In most periods, leading cryptocurrencies drive memecoins; however, when memecoins show a positive net spillover, it tends to trigger the leading cryptocurrencies to crash.

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  • Li, Chao & Yang, Haijun, 2022. "Will memecoins’ surge trigger a crypto crash? Evidence from the connectedness between leading cryptocurrencies and memecoins," Finance Research Letters, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finlet:v:50:y:2022:i:c:s154461232200397x
    DOI: 10.1016/j.frl.2022.103191
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    Cited by:

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    3. Fang, Sheng & Cao, Guangxi & Egan, Paul, 2023. "Forecasting and backtesting systemic risk in the cryptocurrency market," Finance Research Letters, Elsevier, vol. 54(C).

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