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Understanding digital bubbles amidst the COVID-19 pandemic: Evidence from DeFi and NFTs

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  • Maouchi, Youcef
  • Charfeddine, Lanouar
  • El Montasser, Ghassen

Abstract

This paper investigates digital financial bubbles amidst the COVID-19 pandemic. Using a sample of 9 DeFi tokens, 3 NFTs, Bitcoin, and Ethereum, we detect several bubbles overlapping the examined cryptoassets. We also uncover DeFi and NFT-specific bubbles in Summer 2020 suggesting distinct driving factors for this class of assets. We document that DeFi and NFTs bubbles are less recurrent but have higher magnitudes than cryptocurrencies’ bubbles. We also find that COVID-19 and trading volume exacerbate bubble occurrences, while Total Value Locked (TVL) is negatively associated with cryptoassets’ bubbles. Our results suggest that TVL can be used as a tool for market monitoring.

Suggested Citation

  • Maouchi, Youcef & Charfeddine, Lanouar & El Montasser, Ghassen, 2022. "Understanding digital bubbles amidst the COVID-19 pandemic: Evidence from DeFi and NFTs," Finance Research Letters, Elsevier, vol. 47(PA).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pa:s1544612321005341
    DOI: 10.1016/j.frl.2021.102584
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    References listed on IDEAS

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    More about this item

    Keywords

    COVID-19; DeFi; NFTs; Total Value Locked; Digital bubbles; Real-time detection;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G01 - Financial Economics - - General - - - Financial Crises
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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