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Reputational contagion and the fall of FTX: Examining the response of tokens to the delegitimization of FTT

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  • Yousaf, Imran
  • Goodell, John W.

Abstract

Intertwined with the recent fall of cryptocurrency exchange FTX was the unveiling to investors of the lack of asset support for FTX's flagship token FTT. Given interest in reputational contagion, as well as recent academic and investor interest in digital tokens, we are motivated to take advantage of the FTX/FTT event to investigate reputational contagion to other tokens. We employ an event study approach to gauge the impact of the FTX collapse on a variety of tokens. Results of abnormal returns, as well as CARs and CAARs, indicate almost all tokens initiated a persistent bearish trend on the event day.

Suggested Citation

  • Yousaf, Imran & Goodell, John W., 2023. "Reputational contagion and the fall of FTX: Examining the response of tokens to the delegitimization of FTT," Finance Research Letters, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323000788
    DOI: 10.1016/j.frl.2023.103704
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    Reputational contagion; FTX; FTT; Cryptocurrencies; Digital tokens; Event study;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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