Cryptocurrencies

  • 详情 Blockchain Mania without Bitcoins: Evidence from China Stock Market
    Blockchain mania occurs in response to the quick rise of Bitcoin price in markets with cryptocurrencies circulation. However, Chinese government policies regarding the development of blockchain are inconsistent--block access to the offerings and exchanges of cryptocurrencies such as Bitcoins, but raise the blockchain technology to a strategic position. We empirically investigate whether the government’s inconsistent policies will lead to blockchain mania and how it affects the blockchainrelated firms’ activities and performance. Our results are threefold: First, the supportive policy can fully offset the negative effect due to the national boycott of cryptocurrencies. Second, Nonspeculative firms experience a stronger and long-standing positive reaction, while the effect on Speculative firms is transient and vanishes after receiving a definitive warning ten days later. Third, the market reaction to government support appears more pronounced among firms having established blockchain technology alliances, or being endorsed officially.
  • 详情 Tax-Loss Harvesting with Cryptocurrencies
    We study investors’ responses to increasing tax reporting awareness and scrutiny in the crypto markets. Using novel data on retail investors’ trading, we ocument significant taxation effects on investors’ behavior and preferences for crypto-exchanges. Investors engage in tax-loss harvesting through wash trading and trading new products such as non-fungible tokens, consistent with the motive to minimize taxable events, improve tax reporting quality, and balance portfolio losses. U.S.-based traders engage in more tax-loss harvesting at the end of the year than their international peers. We further examine billions of trades on the trading books of large crypto exchanges and discover widespread tax-loss harvesting trades on U.S.-based crypto exchanges, amounting to billions of dollars in tax revenue losses for the government. Finally, we discuss ongoing anti-tax-loss harvesting proposals in anticipation of traders’ likely reactions.
  • 详情 The Crumbling Wall between Crypto and Non-Crypto Markets: Risk Transmission through Stablecoins
    The crypto and noncrypto markets used to be separated from each other. We argue that with the rapid development of stablecoins since 2018, risks are now transmitted between the crypto and noncrypto markets through stablecoins, which are both pegged to noncrypto assets and play a central role in crypto trading. Applying copula-based CoVaR approaches, we find significant risk spillovers between stablecoins and cryptocurrencies as well as between stablecoins and noncrypto markets, which could help explain the tail dependency between the crypto and noncrypto markets from 2019 to 2021. We also document that the risk spillovers through stablecoins are asymmetric—stronger in the direction from the US dollar to the crypto market than vice versa—which suggests the crypto market is re-dollarizing. Further analyses consider alternative explanations, such as the COVID-19 pandemic and institutional crypto holdings, and determine that the primary channels of risk transmission are stablecoins’ US dollar peg to the noncrypto market and their transaction-medium function in the crypto ecosystem. Our results have important implications for financial stability and shed light on the future of stablecoin regulation.
  • 详情 崩溃的墙:加密货币与非加密货币市场之间通过稳定币的风险传导
    The crypto and noncrypto markets used to be separated from each other. We argue that with the rapid development of stablecoins since 2018, risks are now transmitted between the crypto and noncrypto markets through stablecoins, which are both pegged to noncrypto assets and play a central role in crypto trading. Applying copula-based CoVaR approaches, we find significant risk spillovers between stablecoins and cryptocurrencies as well as between stablecoins and noncrypto markets, which could help explain the tail dependency between the crypto and noncrypto markets from 2019 to 2021. We also document that the risk spillovers through stablecoins are asymmetric—stronger in the direction from the US dollar to the crypto market than vice versa—which suggests the crypto market is re-dollarizing. Further analyses consider alternative explanations, such as the COVID-19 pandemic and institutional crypto holdings, and determine that the primary channels of risk transmission are stablecoins' US dollar peg to the noncrypto market and their transaction-medium function in the crypto ecosystem. Our results have important implications for financial stability and shed light on the future of stablecoin regulation.
  • 详情 比特币、资产多元化与中国金融市场
    This research explores the effects of adding bitcoin to an optimal portfolio (naïve, long-only, unconstrained and semi-constrained) of by relying on mean-CVaR approach in Chinese market. Then backtesting to compare the performance of portfolios with and without bitcoin for each scenario is performed. Results show significant but weak correlations between various asset classes and bitcoin, implying a more mature financial profile of bitcoin in China compared to that in the west. Backtesting results show that the effect of adding bitcoin to optimal portfolios is not consistent over the entire out-of-sample period. The naïve and the long-only strategy improved the risk reward ratio up until the late 2013 price-crash with no significant advantages thereafter. Shorting strategies on the other hand, with or without leverage, fail to produce more efficient portfolios when bitcoin is added, and this is consistent over the entire out-of-sample period. The results also show that semi-annual rebalancing amplifies the advantages of adding bitcoin to most portfolios except for the semi-constrained portfolio, although the weights analysis show significant shifts in weights which might not represent a feasible strategy in realistic scenarios.
  • 详情 Bitcoin, Portfolio Diversification and Chinese Financial Markets
    This research explores the effects of adding bitcoin to an optimal portfolio (naïve, long-only, unconstrained and semi-constrained) of by relying on mean-CVaR approach in Chinese market. Then backtesting to compare the performance of portfolios with and without bitcoin for each scenario is performed. Results show significant but weak correlations between various asset classes and bitcoin, implying a more mature financial profile of bitcoin in China compared to that in the west. Backtesting results show that the effect of adding bitcoin to optimal portfolios is not consistent over the entire out-of-sample period. The naïve and the long-only strategy improved the risk reward ratio up until the late 2013 price-crash with no significant advantages thereafter. Shorting strategies on the other hand, with or without leverage, fail to produce more efficient portfolios when bitcoin is added, and this is consistent over the entire out-of-sample period. The results also show that semi-annual rebalancing amplifies the advantages of adding bitcoin to most portfolios except for the semi-constrained portfolio, although the weights analysis show significant shifts in weights which might not represent a feasible strategy in realistic scenarios.