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A preliminary assessment of the performance of DeFi cryptocurrencies in relation to other financial assets, volatility, and user-generated content

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  • Piñeiro-Chousa, Juan
  • López-Cabarcos, M. Ángeles
  • Sevic, Aleksandar
  • González-López, Isaac

Abstract

After the so-called “crypto-winter”, decentralised finance (DeFi) is reviving interest in cryptocurrency amongst the scientific community, public and private institutions, and investors. DeFi is a novel disruptive process that promotes the use of blockchain technology for creating and issuing all kinds of financial products and services. This study aimed to measure the relationship amongst the returns of DeFi tokens, other traditional assets, and user-generated content. While the relationship between other crypto assets and traditional assets has been researched, this has not been done on DeFi assets. This study uses a logit-probit model over a database comprising the daily returns of 13 DeFi, VIX, S&P GSCI Crude Oil Index, and S&P GSCI Gold Index, and the daily variation in DeFi mentions in Telegram chats and Twitter. The results show that all variables except the S&P GSCI crude oil index returns and the daily variation in Twitter mentions were significant. This suggests that DeFi acts, similar to other crypto assets, as a safe haven. This study contributes to the literature on decentralised finance tokens as investment assets, which requires much more research.

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  • Piñeiro-Chousa, Juan & López-Cabarcos, M. Ángeles & Sevic, Aleksandar & González-López, Isaac, 2022. "A preliminary assessment of the performance of DeFi cryptocurrencies in relation to other financial assets, volatility, and user-generated content," Technological Forecasting and Social Change, Elsevier, vol. 181(C).
    • Handle: RePEc:eee:tefoso:v:181:y:2022:i:c:s0040162522002669
    DOI: 10.1016/j.techfore.2022.121740
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    4. Khalfaoui, Rabeh & Mefteh-Wali, Salma & Viviani, Jean-Laurent & Ben Jabeur, Sami & Abedin, Mohammad Zoynul & Lucey, Brian M., 2022. "How do climate risk and clean energy spillovers, and uncertainty affect U.S. stock markets?," Technological Forecasting and Social Change, Elsevier, vol. 185(C).
    5. Ugolini, Andrea & Reboredo, Juan C. & Mensi, Walid, 2023. "Connectedness between DeFi, cryptocurrency, stock, and safe-haven assets," Finance Research Letters, Elsevier, vol. 53(C).
    6. Yousaf, Imran & Jareño, Francisco & Tolentino, Marta, 2023. "Connectedness between Defi assets and equity markets during COVID-19: A sector analysis," Technological Forecasting and Social Change, Elsevier, vol. 187(C).
    7. Piñeiro-Chousa, Juan & Šević, Aleksandar & González-López, Isaac, 2023. "Impact of social metrics in decentralized finance," Journal of Business Research, Elsevier, vol. 158(C).
    8. Younis, Ijaz & Gupta, Himani & Du, Anna Min & Shah, Waheed Ullah & Hanif, Waqas, 2024. "Spillover dynamics in DeFi, G7 banks, and equity markets during global crises: A TVP-VAR analysis," Research in International Business and Finance, Elsevier, vol. 70(PB).
    9. Pham, Linh & Huynh, Toan Luu Duc & Hanif, Waqas, 2023. "Time-varying asymmetric spillovers among cryptocurrency, green and fossil-fuel investments," Global Finance Journal, Elsevier, vol. 58(C).
    10. Qiao, Xingzhi & Zhu, Huiming & Tang, Yiding & Peng, Cheng, 2023. "Time-frequency extreme risk spillover network of cryptocurrency coins, DeFi tokens and NFTs," Finance Research Letters, Elsevier, vol. 51(C).
    11. Ghosh, Indranil & Alfaro-Cortés, Esteban & Gámez, Matías & García-Rubio, Noelia, 2023. "Prediction and interpretation of daily NFT and DeFi prices dynamics: Inspection through ensemble machine learning & XAI," International Review of Financial Analysis, Elsevier, vol. 87(C).
    12. Cevik, Emrah Ismail & Gunay, Samet & Zafar, Muhammad Wasif & Destek, Mehmet Akif & Bugan, Mehmet Fatih & Tuna, Fatih, 2022. "The impact of digital finance on the natural resource market: Evidence from DeFi, oil, and gold," Resources Policy, Elsevier, vol. 79(C).
    13. Mensi, Walid & Gubareva, Mariya & Kang, Sang Hoon, 2024. "Frequency connectedness between DeFi and cryptocurrency markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 93(C), pages 12-27.
    14. Yousaf, Imran & Jareño, Francisco & Esparcia, Carlos, 2022. "Tail connectedness between lending/borrowing tokens and commercial bank stocks," International Review of Financial Analysis, Elsevier, vol. 84(C).
    15. Yousaf, Imran & Pham, Linh & Goodell, John W., 2024. "Dynamic spillovers between leading cryptocurrencies and derivatives tokens: Insights from a quantile VAR approach," International Review of Financial Analysis, Elsevier, vol. 94(C).
    16. Amrutha Muralidhar & Muralidhar Lakkanna, 2024. "Regulating Cryptocurrency and Decentralized Finance for an Inclusive Economy," Papers 2407.01532, arXiv.org.

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