Possible Impact of Facebook’s Libra on Volatility of Bitcoin: Evidence from Initial Coin Offer Funding Data
Possible Impact of Facebook’s Libra on Volatility of Bitcoin: Evidence from Initial Coin Offer Funding Data
Author(s): Chamil W. SenarathneSubject(s): Financial Markets, ICT Information and Communications Technologies
Published by: Vytauto Didžiojo Universitetas
Keywords: Bitcoin; Cryptocurrency; Facebook’s Libra; ICO funding size; GARCH (1,1); ARCH and GARCH effects;
Summary/Abstract: This paper examines the impact of Libra on volatility of Bitcoin using the classical framework of C. G. Lamoureux and W. D. Lastrapes (1990). ARCH and GARCH effects disappear when lagged ICO funding size is included in the variance equation. A negative association between volatility and funding size and the disappearance of volatility persistence (long-term volatility effect) suggest that Libra, as a dominant new currency, is likely to stabilize the cryptocurrency market and enhance potential for currency diversification. Furthermore, it is revealed that the stability cannot be ensured merely by backing decentralized blockchain instruments, such as Bitcoin, with bank deposits, government securities or exchange rate.
Journal: Organizacijų vadyba: sisteminiai tyrimai
- Issue Year: 2019
- Issue No: 81
- Page Range: 87-100
- Page Count: 14
- Language: English