Cryptocurrency Reaction to FOMC Announcements: Evidence of Heterogeneity Based on Blockchain Stack Position

39 Pages Posted: 21 Nov 2017

See all articles by Shaen Corbet

Shaen Corbet

Dublin City University Business School

Charles James Larkin

Trinity College Dublin

Brian M. Lucey

Trinity Business School, Trinity College Dublin; University of Sydney Business School

Andrew Meegan

Dublin City University Business School

Larisa Yarovaya

Anglia Ruskin University - Lord Ashcroft International Business School

Date Written: November 18, 2017

Abstract

This paper looks beyond the world of competing cryptocurrencies and the growing number of digital assets. We examine the reaction of a broad set of digital assets to US Federal Fund interest rate and quantitative easing announcements and the volatility spillover and feedback effects generated as a result. We classify each digital asset into one of three categories: Currencies; Protocols; and Decentralised Applications (dApps). Currency-based digital assets experience idiosyncratic spillovers in the period immediately after US monetary policy announcements, while application or protocol-based digital assets are largely immune to policy volatility spillover and feedback. Mineable digital assets are found to be more susceptible to monetary policy volatility spillovers and feedback than non-mineable. Currencies experience an increase, while Protocols experience a decrease and dApps remain immune to any global systematic volatility spillover transfers and feedback effects. Responses indicate a diverse market in which all assets are not comparable to Bitcoin.

Keywords: Cryptocurrencies; Digital Assets; Bitcoin; Litecoin; GARCH; Volatility Spillovers; Volatility Feedback; Monetary Policy

JEL Classification: E43; G12; L17

Suggested Citation

Corbet, Shaen and Larkin, Charles James and Lucey, Brian M. and Meegan, Andrew and Yarovaya, Larisa, Cryptocurrency Reaction to FOMC Announcements: Evidence of Heterogeneity Based on Blockchain Stack Position (November 18, 2017). Available at SSRN: https://ssrn.com/abstract=3073727 or http://dx.doi.org/10.2139/ssrn.3073727

Shaen Corbet

Dublin City University Business School ( email )

Dublin 9
Ireland

Charles James Larkin

Trinity College Dublin ( email )

AAP College Green
Dublin 2
Ireland

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
Ireland
+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

Andrew Meegan

Dublin City University Business School ( email )

Dublin 9
Ireland

Larisa Yarovaya

Anglia Ruskin University - Lord Ashcroft International Business School ( email )

Cambridge
United Kingdom

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