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Bitcoin market networks and cyberattacks

Author

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  • Costantini, Mauro
  • Maaitah, Ahmad
  • Mishra, Tapas
  • Sousa, Ricardo M.

Abstract

This paper assesses the interconnectedness across Bitcoin trading platforms leading to and in the aftermath of large-scale cyberattacks using a network topology and daily data over the period 1 January 2015–31 May 2019. We find significant volatility spillovers, especially when the frequency and the magnitude of cyberattacks rise. While this suggests the presence of informational inefficiencies, these are not uniformly distributed, as the observed heterogeneity in volatility spillovers depends on the size of the cyberattack. Moreover, cyberattacks appear to change the network structure of Bitcoin trading platforms. Specifically, while the Bitcoin in U.S. dollar platform remains systemically important, the Bitcoin trading platforms of the Yen and Australian dollar have become more relevant in recent times. From a practitioner and market professional perspective, our results suggest that an informed investment strategy can exploit such volatility spillovers to generate abnormal returns. From a policy point of view, the easing of Bitcoin regulation in Asia seems to be linked with the increasingly prominent importance of the trading platforms of the Yen and Australian dollar.

Suggested Citation

  • Costantini, Mauro & Maaitah, Ahmad & Mishra, Tapas & Sousa, Ricardo M., 2023. "Bitcoin market networks and cyberattacks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 630(C).
    • Handle: RePEc:eee:phsmap:v:630:y:2023:i:c:s0378437123007203
    DOI: 10.1016/j.physa.2023.129165
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