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Cryptocurrencies and financial market stability: Theoretical modeling and empirical evidence of spillover effects from sequential attention cycles of crypto investors

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  • M’bakob, Gilles Brice

Abstract

This study examines the impact of cryptocurrency investors’ attention cycles, particularly those driven by Bitcoin halving and blockchain-based financial technologies, on the stability of traditional financial markets. It contributes to the literature by proposing a theoretical framework that models an asymmetric, sequential attention transfer mechanism and tests it empirically using SVAR-X and Bayesian VAR approaches. Monthly data from January 2014 to December 2024, sourced from the 20 countries with the highest cryptocurrency adoption in 2024, are analyzed. Findings reveal that attention shocks propagate asymmetrically from Bitcoin halving to blockchain technologies and subsequently to traditional financial markets through market capitalization cycles and cryptocurrency-backed derivatives. Positive cyclical shocks stabilize markets, whereas negative shocks destabilize them. Robustness and sensitivity analyses confirm these findings and highlight differences between developed and emerging markets. Regulators should enhance monitoring of attention cycles and strengthen oversight of cryptocurrency derivatives to mitigate associated risks.

Suggested Citation

  • M’bakob, Gilles Brice, 2025. "Cryptocurrencies and financial market stability: Theoretical modeling and empirical evidence of spillover effects from sequential attention cycles of crypto investors," Research in International Business and Finance, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:riibaf:v:80:y:2025:i:c:s0275531925003976
    DOI: 10.1016/j.ribaf.2025.103141
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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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