Bitcoin market networks and cyberattacks
Bitcoin market networks and cyberattacks
This paper assesses the interconnectedness across Bitcoin trading platforms leading to and in the aftermath of large-scale cyberattacks using a network topology and daily data over the period 1 January 2015–31 May 2019. We find significant volatility spillovers, especially when the frequency and the magnitude of cyberattacks rise. While this suggests the presence of informational inefficiencies, these are not uniformly distributed, as the observed heterogeneity in volatility spillovers depends on the size of the cyberattack. Moreover, cyberattacks appear to change the network structure of Bitcoin trading platforms. Specifically, while the Bitcoin in U.S. dollar platform remains systemically important, the Bitcoin trading platforms of the Yen and Australian dollar have become more relevant in recent times. From a practitioner and market professional perspective, our results suggest that an informed investment strategy can exploit such volatility spillovers to generate abnormal returns. From a policy point of view, the easing of Bitcoin regulation in Asia seems to be linked with the increasingly prominent importance of the trading platforms of the Yen and Australian dollar.
Bitcoin markets, Cyberattacks, Network analysis, Volatility spillovers
Costantini, Mauro
5363d1ca-3dae-464c-b2f6-eda2560c0f67
Maaitah, Ahmad
7057414d-762b-49d8-9724-f6d9e1fffd09
Mishra, Tapas
218ef618-6b3e-471b-a686-15460da145e0
Sousa, Ricardo M.
cd207fa3-c23d-4cca-8d27-d73efa146b8f
7 October 2023
Costantini, Mauro
5363d1ca-3dae-464c-b2f6-eda2560c0f67
Maaitah, Ahmad
7057414d-762b-49d8-9724-f6d9e1fffd09
Mishra, Tapas
218ef618-6b3e-471b-a686-15460da145e0
Sousa, Ricardo M.
cd207fa3-c23d-4cca-8d27-d73efa146b8f
Costantini, Mauro, Maaitah, Ahmad, Mishra, Tapas and Sousa, Ricardo M.
(2023)
Bitcoin market networks and cyberattacks.
Physica A: Statistical Mechanics and its Applications, 630, [129165].
(doi:10.1016/j.physa.2023.129165).
Abstract
This paper assesses the interconnectedness across Bitcoin trading platforms leading to and in the aftermath of large-scale cyberattacks using a network topology and daily data over the period 1 January 2015–31 May 2019. We find significant volatility spillovers, especially when the frequency and the magnitude of cyberattacks rise. While this suggests the presence of informational inefficiencies, these are not uniformly distributed, as the observed heterogeneity in volatility spillovers depends on the size of the cyberattack. Moreover, cyberattacks appear to change the network structure of Bitcoin trading platforms. Specifically, while the Bitcoin in U.S. dollar platform remains systemically important, the Bitcoin trading platforms of the Yen and Australian dollar have become more relevant in recent times. From a practitioner and market professional perspective, our results suggest that an informed investment strategy can exploit such volatility spillovers to generate abnormal returns. From a policy point of view, the easing of Bitcoin regulation in Asia seems to be linked with the increasingly prominent importance of the trading platforms of the Yen and Australian dollar.
Text
Physica A
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Accepted/In Press date: 9 August 2023
e-pub ahead of print date: 9 September 2023
Published date: 7 October 2023
Additional Information:
Funding Information:
Ricardo M. Sousa acknowledges that NIPE’s work is financed by National Funds of the FCT – Portuguese Foundation for Science and Technology within the project “ UID/ECO/03182/2020 ”.
Keywords:
Bitcoin markets, Cyberattacks, Network analysis, Volatility spillovers
Identifiers
Local EPrints ID: 483775
URI: http://eprints.soton.ac.uk/id/eprint/483775
ISSN: 0378-4371
PURE UUID: a4eca128-45c6-4c76-97e6-b5939376ee4e
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Date deposited: 06 Nov 2023 17:34
Last modified: 18 Mar 2024 03:59
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Contributors
Author:
Mauro Costantini
Author:
Ricardo M. Sousa
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