Essays on Cryptocurrency Market Dynamics: Market Structure, Sentiment, and Connectedness
Project Description
The proposed dissertation is centered on the following overarching research question: To what extent do cryptocurrency prices respond to risks associated with their underlying technological design?
The first paper of this dissertation explores non-standard financial risks that arise in cryptocurrencies due to their technological design by examining how governance disputes are resolved through hard forking in decentralized blockchains. Specifically, the paper provides insights on the immediate effects on returns, trading volume, and volatility of the main blockchain.
The second paper examines spillover risks between the parent blockchain and successful hard forks over an extended time horizon following these governance disputes. In particular, this paper examines whether governance disputes resolved through technological divergence are sufficient to separate networks or whether they continue to influence each other`s price formation.
The third paper examines the market reactions stemming from the two main mechanisms used to implement planned and coordinated protocol upgrades. More precisely, it focuses on protocol upgrades implemented through hard and soft forks. Finally, the fourth paper examines speculative behavior as a central source of risk, given that many cryptocurrencies are not backed by tangible assets due to their technical design. Concretely, this paper proposes a forward-looking sentiment gauge.
Overall, this proposed dissertation provides insights into crypto-specific risks with implications for improving risk management practices, trading strategies, and policy recommendations.
The first paper of this dissertation explores non-standard financial risks that arise in cryptocurrencies due to their technological design by examining how governance disputes are resolved through hard forking in decentralized blockchains. Specifically, the paper provides insights on the immediate effects on returns, trading volume, and volatility of the main blockchain.
The second paper examines spillover risks between the parent blockchain and successful hard forks over an extended time horizon following these governance disputes. In particular, this paper examines whether governance disputes resolved through technological divergence are sufficient to separate networks or whether they continue to influence each other`s price formation.
The third paper examines the market reactions stemming from the two main mechanisms used to implement planned and coordinated protocol upgrades. More precisely, it focuses on protocol upgrades implemented through hard and soft forks. Finally, the fourth paper examines speculative behavior as a central source of risk, given that many cryptocurrencies are not backed by tangible assets due to their technical design. Concretely, this paper proposes a forward-looking sentiment gauge.
Overall, this proposed dissertation provides insights into crypto-specific risks with implications for improving risk management practices, trading strategies, and policy recommendations.
