What is it about?
Our objective in this paper is to explore the impact of 21 terrorist attacks on the risk and return of cryptocurrencies. This is motivated by the rapid increase in Bitcoin and other cryptocurrency prices in conjunction with uncertainty about cryptocurrency fundamental value and how this value is determined. Using daily cryptocurrency returns and the event study methodology, we estimate cryptocurrency abnormal returns around terrorist activities.
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Why is it important?
Our findings indicate that terrorist attacks positively contribute to the returns of cryptocurrencies whilst the attacks also result in short-term risk shifting behavior for different cryptocurrencies.
Perspectives
Our findings suggest at times the intrinsic value of cryptocurrencies may be distorted such that their value as a payment system may be driven by illegal activities. Many individuals view cryptocurrencies as an investment vehicle and, as such, any regulatory enforcement that restricts illegal activities and forces this trading into more opaque cryptocurrencies is likely to influence its value.
Dr Krishna Reddy
Toi Ohomai Institute of Technology
Read the Original
This page is a summary of: An investigative study of links between terrorist attacks and cryptocurrency markets, Journal of Business Research, August 2022, Elsevier,
DOI: 10.1016/j.jbusres.2022.04.019.
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