Bitcoin Markets and Cyberattacks

Abstract

This thesis investigates the impact of the security breach on the Bitcoin cross-market prices by shedding new light on the influences of cyberattacks from several angles. Therefore, the thesis was divided into three separate but interconnected studies that explore the effect of cybercrime by using several empirical strategies to understand the complex behaviour of Bitcoin cross-market prices after breach events. Chapter two investigates the impact of security breaches on the relationship between Bitcoin cross-market prices. Continuous security breach often triggers a collapse of investors’ sentiment resulting in an expected diversification of investment across platforms or
exchange currencies. Moreover, being able to identify a pattern in such security breaches helps in the formation of an adaptive prediction of Bitcoin prices. Thus, the researcher studied the relationships among 14 Bitcoin market prices. Further, he employed network theory to study the impact of breach events on the Bitcoin price network. The findings of the undirected network reveal that cybercrime influenced the topological structure of the Bitcoin prices network. Also, the impact pattern depended on the size of economic loss generated after breach events. Moreover, security breaches can change the crucial players in the Bitcoin prices network.

Chapter three examines the causal relationships between cross-market Bitcoin prices after experiencing a security breach. The researcher employed rolling estimations of a time-varying network to reveal the changes that occurred in the topological structure of the Bitcoin cross-market prices network pre and post each cybercrime. He also classified the changes to most senders and receivers of information among Bitcoin pairs pre and post each breach event. The study sheds light on the temporal dimension of the network and the magnitude of the information spillover between Bitcoin cross-market prices through time. The contagion effects of cyber-attacks are mainly highlighted by showing evidence of the change in the flow of information between the Bitcoin prices network post each security breach. Moreover, the most interesting pattern was that the Bitcoin pair that represents the location of the Bitcoin platform became more active in sending information or Effective Transfer Entropy (ETE) in the network.

Chapter Four provides comprehensive evidence by classifying security breaches that targeted the Bitcoin platform into several categories. Also, the influences of each category are traced to show the impact of the three main classifications on the Bitcoin markets network. The Effective Transfer Entropy (ETE) models was used to evaluate the interdependency among Bitcoin pairs and to shed light on the network adjustment during episodes of turbulence. Further, network analysis is adopted to reveal the change in the causality relationships. The findings suggest that each category of cyberattack has a unique impact on the Bitcoin cross-market prices. More precisely, the cyberattack that influences the availability of cryptocurrencies’ platforms and generates money loss appears to
increase the information transition among Bitcoin markets which may increase the contagion risk in the Bitcoin prices network. Meanwhile, the cybercrime under the confidentiality category reduces the causality linkages in the network.

More information

Identifiers

ORCID for Tapas Mishra: orcid.org/0000-0002-6902-2326

Catalogue record

Export record