To what extent does the collapse of a commercial bank spread contagion across cryptocurrency markets? How do markets behave around bankruptcy if digital assets remain stuck within the bank and cannot be withdrawn? We use a BEKK model to examine contagion effects across major digital assets during the Silicon Valley Bank (SVB) collapse period in early March 2023. We find evidence of contagion across major stablecoins and Bitcoin. We also examine the price action when nearly all withdrawals at SVB were prohibited. We find substantial abnormal movements in stablecoin cumulative returns and traded volumes, indicating a 'flight to safety' from less to more authoritative and trusted stablecoins. The implications for practitioners and policymakers are discussed.

Galati L., Capalbo F. (2024). Silicon Valley Bank bankruptcy and Stablecoins stability. INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS, 91, 1-8 [10.1016/j.irfa.2023.103001].

Silicon Valley Bank bankruptcy and Stablecoins stability

Galati L.
Primo
Writing – Original Draft Preparation
;
2024

Abstract

To what extent does the collapse of a commercial bank spread contagion across cryptocurrency markets? How do markets behave around bankruptcy if digital assets remain stuck within the bank and cannot be withdrawn? We use a BEKK model to examine contagion effects across major digital assets during the Silicon Valley Bank (SVB) collapse period in early March 2023. We find evidence of contagion across major stablecoins and Bitcoin. We also examine the price action when nearly all withdrawals at SVB were prohibited. We find substantial abnormal movements in stablecoin cumulative returns and traded volumes, indicating a 'flight to safety' from less to more authoritative and trusted stablecoins. The implications for practitioners and policymakers are discussed.
2024
Galati L., Capalbo F. (2024). Silicon Valley Bank bankruptcy and Stablecoins stability. INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS, 91, 1-8 [10.1016/j.irfa.2023.103001].
Galati L.; Capalbo F.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/957072
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