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Assessing the crypto market stability after the FTX collapse: A study of high frequency volatility and connectedness

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  • Esparcia, Carlos
  • Escribano, Ana
  • Jareño, Francisco

Abstract

This study examines the intraday volatility connectedness between the FTT token and the major cryptocurrencies (altcoins and stablecoins) surrounding the FTX bankruptcy. Intraday hourly volatility time series are estimated by using a mcGARCH model and then applied to provide network connectedness measures via the TVP-VAR model. Our results suggest that FTX's bankruptcy has increased the overall intraday volatility in the crypto markets. Surprisingly, we reveal that stablecoins are the most affected tokens after the FTX collapse. FTT plays a key role as the main net contributor to the system (confirmed by several robustness tests), whereas USD Coin is shown to be a net receiver from the system. The application of the results to active portfolio management remains to be investigated.

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  • Esparcia, Carlos & Escribano, Ana & Jareño, Francisco, 2024. "Assessing the crypto market stability after the FTX collapse: A study of high frequency volatility and connectedness," International Review of Financial Analysis, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:finana:v:94:y:2024:i:c:s1057521924002199
    DOI: 10.1016/j.irfa.2024.103287
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    Cited by:

    1. Riccardo De Blasis & Luca Galati & Rosanna Grassi & Giorgio Rizzini, 2024. "Information Flow in the FTX Bankruptcy: A Network Approach," Papers 2407.12683, arXiv.org.

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    More about this item

    Keywords

    FTX exchange; Intraday volatility; High frequency connectedness; mcGARCH; TVP-VAR;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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