Causal estimation of FTX collapse on cryptocurrency: a counterfactual prediction analysis
Abstract This study uses the Bayesian structural model to assess the causal effect of the futures exchange (FTX) insolvency on cryptocurrencies from October 2022 to December 14, 2022. Findings show that FTX insolvency negatively impacts cryptocurrencies. Moreover, the results indicate rapid divergen...
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| Format: | Article |
| Language: | English |
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SpringerOpen
2025-01-01
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| Series: | Financial Innovation |
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| Online Access: | https://doi.org/10.1186/s40854-024-00690-8 |
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| author | Khalid Khan Adnan Khurshid Javier Cifuentes-Faura |
| author_facet | Khalid Khan Adnan Khurshid Javier Cifuentes-Faura |
| author_sort | Khalid Khan |
| collection | DOAJ |
| description | Abstract This study uses the Bayesian structural model to assess the causal effect of the futures exchange (FTX) insolvency on cryptocurrencies from October 2022 to December 14, 2022. Findings show that FTX insolvency negatively impacts cryptocurrencies. Moreover, the results indicate rapid divergence from counterfactual predictions, and the actual cryptocurrencies are consistently lower than would have been expected in the absence of the FTX collapse. Cryptocurrency is reacting strongly to the uncertainty caused by insolvency. In relative terms, the collapse of FTX has been highly detrimental to Solana and Ethereum. Furthermore, the outcomes show that cryptocurrencies would not have been negatively affected if the intervention had not occurred. FTX collapsed owing to a mismatch between the assets and liabilities. The industry is still mostly unregulated, and regulators must act quickly, highlighting the need for outstanding innovation and decentralized and trustless technology adoption. |
| format | Article |
| id | doaj-art-daf48904f2404a6d96a9c9a7c302b95d |
| institution | Kabale University |
| issn | 2199-4730 |
| language | English |
| publishDate | 2025-01-01 |
| publisher | SpringerOpen |
| record_format | Article |
| series | Financial Innovation |
| spelling | doaj-art-daf48904f2404a6d96a9c9a7c302b95d2025-01-12T12:36:26ZengSpringerOpenFinancial Innovation2199-47302025-01-0111111710.1186/s40854-024-00690-8Causal estimation of FTX collapse on cryptocurrency: a counterfactual prediction analysisKhalid Khan0Adnan Khurshid1Javier Cifuentes-Faura2International Education Department, Hengxing UniversitySchool of Economics and Management, Zhejiang Normal UniversityFaculty of Economics and Business, University of MurciaAbstract This study uses the Bayesian structural model to assess the causal effect of the futures exchange (FTX) insolvency on cryptocurrencies from October 2022 to December 14, 2022. Findings show that FTX insolvency negatively impacts cryptocurrencies. Moreover, the results indicate rapid divergence from counterfactual predictions, and the actual cryptocurrencies are consistently lower than would have been expected in the absence of the FTX collapse. Cryptocurrency is reacting strongly to the uncertainty caused by insolvency. In relative terms, the collapse of FTX has been highly detrimental to Solana and Ethereum. Furthermore, the outcomes show that cryptocurrencies would not have been negatively affected if the intervention had not occurred. FTX collapsed owing to a mismatch between the assets and liabilities. The industry is still mostly unregulated, and regulators must act quickly, highlighting the need for outstanding innovation and decentralized and trustless technology adoption.https://doi.org/10.1186/s40854-024-00690-8CryptocurrencyFTX collapseCausal inferenceCounterfactual predictingBayesian structural model |
| spellingShingle | Khalid Khan Adnan Khurshid Javier Cifuentes-Faura Causal estimation of FTX collapse on cryptocurrency: a counterfactual prediction analysis Financial Innovation Cryptocurrency FTX collapse Causal inference Counterfactual predicting Bayesian structural model |
| title | Causal estimation of FTX collapse on cryptocurrency: a counterfactual prediction analysis |
| title_full | Causal estimation of FTX collapse on cryptocurrency: a counterfactual prediction analysis |
| title_fullStr | Causal estimation of FTX collapse on cryptocurrency: a counterfactual prediction analysis |
| title_full_unstemmed | Causal estimation of FTX collapse on cryptocurrency: a counterfactual prediction analysis |
| title_short | Causal estimation of FTX collapse on cryptocurrency: a counterfactual prediction analysis |
| title_sort | causal estimation of ftx collapse on cryptocurrency a counterfactual prediction analysis |
| topic | Cryptocurrency FTX collapse Causal inference Counterfactual predicting Bayesian structural model |
| url | https://doi.org/10.1186/s40854-024-00690-8 |
| work_keys_str_mv | AT khalidkhan causalestimationofftxcollapseoncryptocurrencyacounterfactualpredictionanalysis AT adnankhurshid causalestimationofftxcollapseoncryptocurrencyacounterfactualpredictionanalysis AT javiercifuentesfaura causalestimationofftxcollapseoncryptocurrencyacounterfactualpredictionanalysis |