No Effect Until 5 Days Later

Hacking Incidents and Bitcoin Price: A fascinating study shows that it take 5 days for a known hacking incident to have an effect on the price of Bitcoin.

According to Chainalysis, last year, crypto criminals directly stole a record $3.2bn worth of cryptocurrency.

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The scale of these thefts has prompted a team from the University of Vaasa, in Finland, to see what effect these big hacks have on the price of Bitcoin.

They decided to choose a period of time, and then study what the market did after news of a hack reached the mainstream press.  

In the 2013-2017 period, a total of 1.1 million bitcoin were stolen. This is the time slot the team chose to study. Given the current price for Bitcoin is around $42,000, the corresponding monetary equivalent of losses is deep in the billions. This must be presumed to have a massive impact on society, and on the markets.

Hack incidents and Bitcoin price: The study

So, when it comes to cyberattacks, how does the price of Bitcoin respond? In this research article from Dr. Klaus Groby, he shows how he examined 29 hacking incidents in the Bitcoin market.

Grobys found that after a cyberattack, Bitcoin volatility does not respond with a subsequent increase in uncertainty between the next day and the fourth day.

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However, here’s the interesting bit. The study finds evidence for a delayed response in volatility. Bitcoin volatility increased sharply on the fifth day after a hacking incident.

Hack incidents and Bitcoin price

So why the delay? The late response points towards inefficiency in the Bitcoin market. Shocks need time to be fully priced-in.

There are more interesting findings. Hackings in the Bitcoin market also affect other crypto markets. There is a contagion effect in volatility associated with hacking incidents. For example, the volatility in the Ethereum market increases sharply with a time delay at 5 days. And the magnitude of volatility matches that of Bitcoin’s.

Dr. Klaus Grobys said, “My study is a first attempt to reveal potential risk factors and their effects on the new emerging digital financial markets – cyberattacks is only one of these new risk factors.”

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