Conditional Tail-Risk in Cryptocurrency Markets

Tail Risk Measurement in Crypto-Asset Markets

“…To place our findings in existing studies, the evidence of a negative systemic effect of the tail risk of Bitcoin on other cryptocurrencies confirms the results in Agosto and Cafferata (2020); Bouri et al (2019) and Borri (2019), which suggests that Bitcoin acts as a safe haven for "diversification" purposes in the crypto market. The positive systemic impact of ETH makes it serve a "complementary" role.…”

“…We thus contribute to the market risk literature with a model that combines tail risk not only with systematic risk but also with systemic risk. To exemplify our proposal, we consider the leading assets from the crypto-asset market, thereby also extending the recent work of Borri (2019), who used CoVaR to show that crypto assets are highly exposed to tail risk from their market, but not from traditional assets. Our work is related to a recent research line that aims to explain bubbles in crypto prices in terms of interconnectedness between them or between exchange markets: (see for example Agosto and Cafferata, 2020;Bouri et al, 2019;Corbet et al, 2018;Giudici et al, 2019).…”

Risks and Returns of Cryptocurrency

“…Yermack (2015) is one of the first papers that brought academic attention to the field of cryptocurrency. Several recent papers (e.g., Stoffels, 2017, Borri, 2018, Borri and Shakhnov, 2018, Foley, Karlsen, and Putniņš (2018, and Hu, Parlour, and Rajan, 2018) document individual facts related to cryptocurrency investment. A number of recent papers develop models of cryptocurrencies (see, e.g., Weber (2016), Huberman, Leshno, and Moallemi (2017), Biais et al (2018), Chiu and Koeppl (2017), , Cong, Li, and Wang, 2018, Cong, He, and Li, 2018, Sockin and Xiong, 2018, Saleh, 2018, Schilling and Uhlig, 2018, Abadi and Brunnermeier (2018, Routledge and Zetlin-Jones (2018), and Makarov and Schoar (2018)).…”

Comovement and Instability in Cryptocurrency Markets

“…They also demonstrate that cryptocurrency returns can be predicted by two factors specific to their markets (momentum and investors attention) and that supply factors (mining costs, price-to-dividend ratios, or realized volatility) are not useful for predicting their dynamics. Borri (2019) studies conditional tail-risk in Bitcoin, Ethereum, Ripple, and Litecoin, and finds that, unconditionally and conditionally, cryptocurrencies are highly correlated with one another, but poorly correlated with other global assets, including gold. He also shows that cryptocurrencies could exhibit attractive returns and hedging features.…”