What is it about?
Infrastructure failures generate 5.7× larger volatility shocks than regulatory announcements in cryptocurrency markets (2.385% vs 0.419%, p=0.0008, Cohen's d=2.753). Using TARCH-X models with decomposed GDELT sentiment indices across 50 events (2019-2025) and 6 cryptocurrencies (BTC, ETH, XRP, BNB, LTC, ADA), we demonstrate that markets distinguish between mechanical-disruption events (exchange outages, protocol exploits) and expectation-channel events (enforcement actions, policy changes).
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Why is it important?
Portfolio managers should allocate 4–5× higher capital buffers for infrastructure events. The near-integrated volatility persistence suggests cryptocurrency markets operate in a distinct regime where shocks become absorbed into long-memory processes, posing fundamental challenges for traditional risk management frameworks.
Perspectives
This study warrants further investigation on decentralized network dynamics as we continue to operate across borders. Decentralization has become a growing trend globally and perhaps this is just one area in which we need to reconsider our approaches to governance.
Masters Student & Researcher Murad Farzulla
King's College London
Read the Original
This page is a summary of: Infrastructure vs Regulatory Shocks: Asymmetric Volatility Response in Cryptocurrency Markets, December 2025, Springer Science + Business Media,
DOI: 10.21203/rs.3.rs-8323026/v1.
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