Riding the Wave of Crypto-Exuberance: The Potential Misusage of Corporate Blockchain Announcements

Abstract

Cryptocurrencies have been broadly scrutinised in recent times for a host of concerning regulatory and cybercriminality issues. Although steps have been taken to promote regulatory sufficiency in the near future, we examine the avenues through which this extremely high-risk industry can derive potentially devastating contagion channels, influencing both unwilling and unsuspecting investors. We focus this research on the expressions of interest by publicly traded companies across the world to utilise cryptocurrency and blockchain projects. We find evidence that there exists a substantial stock price premium and sustained increase in volatility in the aftermath of blockchain announcements, with emphasis on highly-speculative motives such as coin creation and corporate name changes. Changes in price discovery and information flows are found to be largely determined from cryptocurrency-based pricing sources in the aftermath of speculative announcements. We discuss the inherent ethical and legal issues, considering as to whether such announcements are simply an attempt to artificially manipulate share prices and take part in the current phase of crypto-exuberance.

Cryptocurrency liquidity and volatility interrelationships during the COVID-19 pandemic

“…That cryptocurrencies could potentially act as a financial safe haven is quite an incredible development, given their relatively short history, frequency of substantial black-swan events and the ever-increasing probability of economic decoupling resulting from intermittent lock-downs to mitigate reoccurring pandemics. Further, we must consider issues with regards to the storage of significant assets in products that are observed as high-risk and under constant threat of cybercriminality, notwithstanding the exceptional concerns surrounding the inherent technical and regulatory ambiguity that has been observed and identified in detail by policy-makers and regulators ( Gandal, Hamrick, Moore, Oberman, 2018 , Corbet, Cumming, Lucey, Peat, Vigne, 2019 , Griffin, Shams, 2020 , Akyildirim, Corbet, Cumming, Lucey, Sensoy, 2020 ). This research sets out to establish whether such safe-haven behaviour can be identified in the relationship between cryptocurrency price-volatility and liquidity, as evidenced in shifting dynamics after the Chinese identification of COVID-19 in mid-November 2019 and the official WHO announcement of a pandemic in early-January 2020.…”

The influence of the COVID-19 pandemic on the hedging functionality of Chinese financial markets

“… 2 Such research builds upon work that investigates contagion and spillover effects due to a variety of behavioural effects relating to cryptocurrency dynamics. Important work here includes, ( Cioroianu et al, 2020a , b ; Meegan et al, 2018 ; Akhtaruzzaman et al, 2020 ; Akyildirim, Corbet, Cumming, Lucey, and Sensoy, 2020 ; Hu et al, 2020 ; Katsiampa et al, 2019a , b ) and ( Akyildirim, Corbet, Sensoy, and Yarovaya, 2020 ). A concise review of cryptocurrency market behaviour is provided by Corbet et al (2019) .…”

A Survey of Fintech Research and Policy Discussion

“…For example, they find the presence of a bonus is positively associated with funding success, while the length of white papers has only marginally significant impact on ICO funding success. Akyildirim et al (2020) find that stock prices of companies that announce interest in cryptocurrencies earn a significant premium, suggesting that crypto announcements can be used to manipulate the associated company's stock price. Other related studies on the returns and success of ICOs include Adhami, Giudici, and Martinazzi (2017); Hu, Parlour, and Rajan (2018); Fisch and Momtaz (2020); Momtaz (2020); and Benedetti and Kostovetsky (2018).…”