Financial contagion in cryptocurrency exchanges: Evidence from the FTT collapse
Publication Name
Finance Research Letters
Abstract
To what extent does the collapse of a digital token spread contagion across cryptocurrency markets? How do markets incorporate information in this turbulent setting? We examine contagion effects across major digital exchanges during the collapse of the FTX exchange and its token, FTT. We find evidence of contagion across crypto exchanges. We also examine the information cascade effects of other crypto assets on FTX when nearly all withdrawals were prohibited. We find abnormal returns for major assets, indicating a flight to safety from less to more authoritative digital assets. The implications for traders, exchanges, and policymakers are discussed.
Open Access Status
This publication may be available as open access
Volume
67
Article Number
105747
Funding Sponsor
Universiteit Gent