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Joint Impact of Market Volatility and Cryptocurrency Holdings on Corporate Liquidity: A Comparative Analysis of Cryptocurrency Exchanges and Other Firms

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  • Namryoung Lee

    (School of Business, Korea Aerospace University, Goyang 10540, Republic of Korea)

Abstract

This study examines the impact of market volatility and cryptocurrency holdings on corporate liquidity, with a particular focus on the differences between cryptocurrency exchanges and other businesses. The analysis is based on 181 firm-year observations from 2017 to 2022, using Bitcoin volatility, VIX, and VKOSPI as indicators of market volatility. Ordinary Least Squares (OLS) and robust regression analyses are employed to assess the relationships between these variables. It is first noted that, albeit insignificant, market volatility has a detrimental influence on company liquidity. The positive correlation for cryptocurrency exchanges, however, suggests that cryptocurrency exchanges could potentially leverage market volatility as a strategic advantage. Additionally, the study shows that cryptocurrency holdings enhance corporate liquidity, with a stronger association observed in cryptocurrency exchanges. The analysis also incorporates lagged variables to capture delayed effects, confirming that cryptocurrency holdings exert both immediate and delayed positive impacts on liquidity, likely due to effective strategic management practices within exchanges.

Suggested Citation

  • Namryoung Lee, 2024. "Joint Impact of Market Volatility and Cryptocurrency Holdings on Corporate Liquidity: A Comparative Analysis of Cryptocurrency Exchanges and Other Firms," JRFM, MDPI, vol. 17(9), pages 1-20, September.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:9:p:406-:d:1474638
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    References listed on IDEAS

    as
    1. Peter Reinhard Hansen & Chan Kim & Wade Kim, 2024. "Periodicity in Cryptocurrency Volatility and Liquidity," Journal of Financial Econometrics, Oxford University Press, vol. 22(1), pages 224-251.
    2. Dyhrberg, Anne Haubo, 2016. "Bitcoin, gold and the dollar – A GARCH volatility analysis," Finance Research Letters, Elsevier, vol. 16(C), pages 85-92.
    3. Platanakis, Emmanouil & Urquhart, Andrew, 2020. "Should investors include Bitcoin in their portfolios? A portfolio theory approach," The British Accounting Review, Elsevier, vol. 52(4).
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