Correlative Relationships Between Cryptoassets and Price Bubbles: Risk and Contagion Dynamics of Digital Markets

Yıl 2025, Cilt: 12 Sayı: 1, 128 - 153, 14.02.2025

Oğuzhan Ece , Bülent Diclehan Çadırcı

https://doi.org/10.26650/JEPR1576498

Öz

The development of cryptographic digital markets and the growing number of investors have generated concerns about the formation of price bubbles. We can describe the formation of a price bubble as a manifestation of the pricing paradox, characterised by an increase in an asset’s value beyond its intrinsic worth. Investor sensitivity and emotional responses, disequilibrium in supply and demand, speculation and irrational investor behaviour, excessive volatility, and uncertainty nourish this paradoxical tendency. Examining balloon formations in these markets offers valuable insights for educating investors about market cycles and risk management, which can aid policymakers in preserving market stability and protecting financial systems. The objective of this study, which examines the phenomenon of price bubbles in digital asset markets, is to ascertain whether these bubbles are unique to the digital asset market or whether they have a broader economic origin. The objective is to identify, establish the stability of, and facilitate the prediction of price developments, with a particular focus on the potential for market crashes. The GSADF methodology examined 18 digital assets in total, including CCC, NFT, and DeFI, for price bubble formation in this context. The digital assets analysed in this study were selected based on their market representativeness, as evidenced by 200 weeks of observation data covering the period from October 5, 2020, to July 29, 2024. The analysis yielded two key findings: the existence of asset-specific and market-induced bubbles and the observation that different markets exhibit common risk sensitivity. Additionally, the movements of highly liquid digital assets (BTC, etc.) may serve as an indicator of impending market crashes due to their high correlation with other markets. The current body of research on cryptoassets tends to focus on traditional assets and relationships between binary or restricted asset groups, leaving this study poised to make a significant and comprehensive contribution to the existing literature on this subject.

JEL Classification : G12 , G15 , C58

Anahtar Kelimeler

Cryptocurrencies , NFT , DeFI , Price Bubbles , GSADF

Kaynakça

• Aharon, D. Y., & Demir, E. (2022). NFTs and asset class splllovers: Lessons from the perlod around the COVID-19 pandemlc. Finance Research Letters, 47, 102515. google scholar
• Akerlof, G. A., & Shiller, R. J. (2015). Akerlof, G. A., & Shiller, R. J. (2015). Phishing for phools: The economics of manipulation and deception. Princeton University Press. google scholar
• Akintola, K. G., Eluyode, O. S., & Oyedele, O. O. (2019). A microcontroller based electronic payment system for cashless transportation systems. Iconic Research and Engineering Journals, 3(5), 22-25. google scholar
• Assaf, A., Demir, E., & Ersan, O. (2024). Detecting and date-stamping bubbles in fan tokens. International Review of Economics & Finance, 92, 98-113. google scholar
• Baek, C., & Elbeck, M. (2015). Bitcoins as an investment or speculative vehicle? A first look. Applied Economics Letters, 22(i), 30-34 google scholar
• Bandura, A. (1977). Social learning theory. Englewood Cliffs. google scholar
• Banerjee, A. V. (1992). A simple model of herd behavior. The Quarterly Journal of Economics, 107(3), 797-817. https://doi.org/10.2307/ 2118364 google scholar
• Banerjee, A. V., Chandrasekhar, A. G., Duflo, E., & Jackson, M. O. (2000). The diffusion of microfinance." Science, 327(5969), 1201-1205. google scholar
• Barberis, N., & Thaler, R. (2003). A Survey of Behavioral Finance. Handbook of the Economics of Finance.1 google scholar
• Barbon, A., & Ranaldo, A. (2023). NFT bubbles. arXiv preprint arXiv:2303.06051 google scholar
• Baur, D. G., & Dimpfl, T. (2021). The volatility of Bitcoin and its role as a medium of exchange and a speculative asset. International Review of Financial Analysis, 77, 101890. google scholar
• Baur, D. G., Hong, K., & Lee, A. D. (2018). Bitcoin: Medium of exchange or speculative assets?. Journal of International Financial Markets, Institutions and Money, 54, 177-189. DOI: 10.1016/j.intfin.2017.12.004 google scholar
• Benedetti, H., & Kostovetsky, L. (2021). Digital tulips? Returns to investors in initial coin offerings. Journal of Corporate Finance, 66, 101816 google scholar
• Blau, B. M. (2018). Price Dynamics and speculative trading in Bitcoin. Journal of Financial Stability, 34, 65-76 google scholar
• Bohme, R., Christin, N., Edelman, B., & Moore, T. (2015). Bitcoin: Economics, Technology, and Governance. Journal of Economic Perspec-tives, 29(2), 213-238. google scholar
• Bouri, E., Molnâr, P., Azzi, G., Roubaud, D., & Hagfors, L. I. (2017). On the hedge and safe haven properties of Bitcoin: Is it really more than a diversifier? Finance Research Letters, 20, 192-198. google scholar
• Brunnermeier, M. K. (2008), Bubbles, The New Palgrave Dictionary of Economics, (Ed.: S. Durlaufand ve L. Blume), p.578-582, Mac Millian Publishers Ltd google scholar
• Caspi, I. (2017). Rtadf: Testing for Bubbles with EViews. Journal of Statistical Software(81), 1-16. google scholar
• Catalini, C., & Gans, J. (2018). Initial coin offerings and the value of crypto tokens. Harvard Business Review google scholar
• Catalini, C., & Gans, J. S. (2016). Some simple economics of the blockchain. NBER Working Paper No. 22952. google scholar
• Cheah, E.-T. & Fry, J. (2015). Speculative bubbles in Bitcoin markets? an Empirical investigation into the fundamental value of Bitcoin. Economics Letters 130: 32-36. DOI:10.1016/j.econlet.2015.02.029. google scholar
• Chen, Y., & Wang, X. (2024). Regulatory impact on bubble formation in cryptocurrency markets. Journal of Regulatory Economics, 33(1), 45-70. DOI: 10.1007/s11149-023-09456-7 google scholar
• Cheung, A., Roca, E., & Su, J. J. (2015). Crypto-currency bubbles: An Application of the Phillips-Shi-Yu (2013) methodology on Mt. Gox bitcoin prices. Applied Economics, 47(23), 2348-2358. google scholar
• Cong, L. W., He, Z., & Li, J. (2021). Decentralized Finance: Blockchain technology and the quest for an open financial system. The Review of Financial Studies, 34(3), 550-594. google scholar
• Corbet, S., Goodell, J. W., Gunay, S., & Kaskaloglu, K. (2023). Are DeFi tokens a separate asset class from conventional cryptocurrencies?. Annals of Operations Research, 322(2), 609-630. google scholar
• Corbet, S., Larkin, C., & Lucey, B. (2020). The contagion effects of the COVID-19 pandemic: Evidence from gold and cryptocurrencies. Finance Research Letters, 35, 101554. google scholar
• Corbet, S., Lucey, B., & Yarovaya, L. (2018). Datestamping the Bitcoin and Ethereum bubbles. Finance Research Letters, 26, 81-88 google scholar
• Dai, W. (1998). B-money. google scholar
• Diba, B. T., & Grossman, H. I. (1988). Explosive rational bubbles in stock prices?. The American Economic Review, 78(3), 520-530. google scholar
• Dowling, M. (2022). Is non-fungible token pricing driven by cryphtocurrencies?, Finance Research Letters, 44. 102097 google scholar
• Elike, U., ve Anoruo, E. (2017). Testing for explosive bubbles in the South African-US exchange rate using the sequential ADF procedures. Banks and Bank Systems, 12(i), 105-112. google scholar
• Fang, F., & Su, Z. (2022). How media sentiments drive Cryptocurrency market: evidence from panic and boom sentiment Index. Finance Research Letters, 47, 102591. google scholar
• Fernândez, J., & Garcîa, M. (2023). Social media sentiment and bubble formation in the DeFi ecosystem. Journal of Behavioral Finance, 24(3), 211-230. DOI: 10.1080/15427560.2023.2034988 google scholar
• Foley, S., Karisen, J. R., & Putnins, T. J. (2019). Sex, drugs, and bitcoin: How much illegal activity is financed through cryptocurrencies? The Review of Financial Studies, 32(5), 1798-1853 google scholar
• Fry, J., & Cheah, E.-T. (2016). Negative bubbles and shocks in cryptocurrency markets. International Review of Financial Analysis, 47, 343-352. google scholar
• Garber, P. M. (2000), Famous First Bubbles: The Fundamentals of Early Manias, Cambridge, MA.: MIT Press, google scholar
• Garcia, D., Tessone, C. J., Mavrodiev, P., & Perony, N. (2014). The digital traces of bubbles: feedback cycles between socio-economic signals in the Bitcoin economy. Journal of the royal society interface, 11(99), 20140623 google scholar
• Garcia, M., & Lee, S. (2023) Market sentiment and bubble formation in NFT markets. International Journal of Digital Economics, 12(2), 134-156. DOI: 10.1016/j.ijded.2023.02.004 google scholar
• Gerard, D. (2017). Attack of the 50 Foot Blockchain: Bitcoin, Blockchain, Ethereum & Smart Contracts. David Gerard. google scholar
• Giudici, G., Milne, A., & Vinogradov, D. (2020). Cryptocurrencies: market analysis and perspectives. Journal of Industrial and Business Economics, 47, 1-18. google scholar
• Glaser, F., Zimmermann, K., Haferkorn, M., Weber, M. C., & Siering, M. (2014). Bitcoin - Asset or Currency? Revealing Users’ Hidden Intentions. ECIS 2014 Proceedings, 4. google scholar
• Guo, M., Wang, S., & Wei, Y. (2023). Bubbles in NFT markets: correlated with cryptocurrencies or sentiment indexes?. Applied Economics Letters, 1-7. google scholar
• Güler, İ., ve Gökçe, A. (2020). Yabancılara konut satışı ile konut balonu İlişkisinin GSADF sınamaları ile araştırılması: Türkiye geneli ve İstanbul, Antalya illeri örneği. Üçüncü Sektör Sosyal Ekonomi Dergisi, 55(2), 989-1007. google scholar
• Harrison, M., & Kreps, D. M. (1978). Speculative investor behavior in a stock market with heterogeneous expectations. The Quarterly Journal of Economics, 92(2), 323-336. google scholar
• Harwick, C. (2016). Cryptocurrency and the Problem of Intermediation. Independent Review, 20(4), 569-588 google scholar
• Hayes, A. S. (2017). Cryptocurrency value formation: An empirical analysis leading to a cost of production model for valuing Bitcoin. Telecommunications Policy, 41(10), 961-977 google scholar
• Helms, K. (2022). Terra collapse triggers crypto barketwide crash, leading to $500 billion wiped out in one week. CoinDesk google scholar
• Homm, U., ve Breitung, J. (2012). Testing for speculative bubbles in stock larkets: A comparison of alternative methods. Journal of Financial Econometrics, 10(i), 198-231. google scholar
• İskenderoğlu, Ö., ve Akdağ, S. (2019). Türkiye'de Reel Konut Fiyatlarında Balonların Varlığı Üzerine Uygulamalı Bir Analiz. Business and Economics Research, 10(5), 1085-1093. google scholar
• Katsiampa, P. (2017). Volatility estimation for Bitcoin: a comparison of GARCH models. Economics Letters, 158, 3-6. DOI: 10.1016/ j.econlet.2017.02.032 google scholar
• Katsiampa, P., Corbet, S., & Lucey, B. (2019). High frequency volatility co-movements in cryptocurrency markets. Journal of International Financial Markets, Institutions and Money, 62, 35-52. google scholar
• Kindleberger, C. P., ve Aliber R. (2005), Manias, panics and crashes: a history of financial crises, 3. Edt., New Jersey: John Wiley & Sons. google scholar
• Kindleberger, CP (1987). Bubbles. in: The New Palgrave Dictionary of Economics. Palgrave Macmillan, 1. Ed., (Edt: John Eatwell, Murray Milgate and Peter Newman), Londra. https://doi.org/l0.1057/978-1-349-95121-5_44-1 google scholar
• King, M. R., & Wadhwani, S. (1990). Transmission of volatility between stock markets. The Review of Financial Studies google scholar
• Kristoufek, L. (2015). What are the main Drivers of the Bitcoin price? Evidence from wavelet coherence analysis. PloS One, 10(4), e0123923. google scholar
• Li, X., & Jiang, W. (2023). Cross-market contagion of speculative bubbles: Evidence from CCC, NFT, and DeFi markets. Journal of Financial Stability, 57, 100950. DOI: 10.1016/j.jfs.2023.100950 google scholar
• Liao, X., Li, Q., Chan, S., Chu, J., & Zhang, Y. (2024). Interconnections and contagion among cryptocurrencies, DeFi, NFT and traditional financial assets: Some new evidence from tail risk driven network. Physica A: Statistical Mechanics and its Applications, 647, 129892. google scholar
• Liu, Y., & Tsyvinski, A. (2021). Risks and returns of cryptocurrency. The Review of Financial Studies, 34(6), 2689-2727. google scholar
• Liu, Z., Han, D., ve Wang, S. (2016). Testing bubbles: Exuberance and collapse in the Shanghai a-share stock market. China's NewSources of Economic Growth: Reform,Resources and Climate Change, 1, 247-269. google scholar
• Mai, F., Shan, Z., Bai, Q., Wang, X. S., & Chiang, R. H. (2018). How does social media impact Bitcoin value? a test of the silent majority hypothesis. Journal of Management Information Systems, 35 (i), 19-52. google scholar
• Mandacı, P. E., ve Çağlı, E. Ç. (2018). Türkiye konut piyasasında balon var mı? İstatistiki bölge birimleri üzerine bir analiz. Finans Politik ve Ekonomik Yorumlar(646), 85-113. google scholar
• Maouchi, Y., Charfeddine, L., & El Montasser, G. (2022). Understanding digital bubbles amidst the COVID-19 pandemic: Evidence from DeFi and NFTs. Finance Research Letters, 47, 102584. google scholar
• McMillan, R. (2014). The inside story of Mt. gox, Bitcoin's $460 million disaster. wired. google scholar
• Minsky, H. P. (1986). Stabilizing an Unstable Economy. Yale University Press. google scholar
• Müller, T., & Schmidt, H. (2024). Volatility and bubble detection in bybrid crypto markets: CCC, NFT, and DeFi. Journal of Cryptocurrency Research, 5(1), 78-102. DOI: 10.1016/j.jcr.2024.01.005 google scholar
• Naeem, M. A., Bouri, E., Peng, Z., Shahzad, S. J. H., & Vo, X. V. (2021). Asymmetric efficiency of cryptocurrencies and investor sentiment. Journal of International Financial Markets, Institutions and Money, 71, 101340. google scholar
• Nakamoto, S. (2008), “Bitcoin: a peer-to-peer Electronic cash system.” available at: https://bitcoin.org/bitcoin.pdf google scholar
• Öztürk, B., & Demir, C. (2024). Behavioral factors influencing bubble formation in NFT and DeFi markets. Journal of Behavioral and Experimental Finance, 10(i), 50-75.DOI: 10.1016/j.jbef.2024.01.003 google scholar
• Phillip, A., Chan, J., & Peiris, S. (2018). A new look at cryptocurrencies. Economics Letters, 163, 6-9. google scholar
• Phillips, P. C., Shı, S., ve Yu, J. (2015). Testing for multiple bubbles: Historical episodes of exuberance and collapse in the S&P 500. International Economic Review, 56(4), 1043-1078. google scholar
• Phillips, P. C., Wu, Y., ve Yu, J. (2011). Explosive behavior in the 1990s Nasdaq: when did exuberance escalate asset values? International Economic Review, 52(i), 201-226. google scholar
• Popper, N. (2021). Bitcoin hits new highs, then falls. will it get back to $69,000? The New York Times. google scholar
• Posner, E. & Weyl, G. (2011). Bitcoin and the financial system. Forbes. google scholar
• Scharfman, J. (2021). Cryptocurrencies and decentralized finance (DeFi). Routledge Handbook of FinTech. google scholar
• Shahzad, S. J. H., Bouri, E., Roubaud, D., Kristoufek, L., & Saeed, T. (2019). Herding behavior in cryptocurrencies. Finance Research Letters, 31, 282-287. google scholar
• Sharma, S., ve Escobari, D. (2018). Identifying price bubble periods in the energy sector. Energy Economics (69), 418-429. google scholar
• Shiller, R. J. (2000). Irrational Exuberance. Princeton University Press. google scholar
• Szabo, N. (2005). Bit gold. recuperado De https://nakamotoinstitute. org/bit-gold/TVer pâgina, 251-260. google scholar
• Tirole, J. (1985). “pAsset Bubbles and the theory of rational pricing.” Journal of Finance, 40(3), 13-26. google scholar
• Urquhart, A. (2016). The Inefficiency of Bitcoin. Economics Letters 148: 80-82. doi:10.1016/j.econlet.2016.09.019.C google scholar
• Vigna, P. (2022). FTX collapse: What happened and how it has impacted the crypto market. The Wall Street Journal. google scholar
• Wang, Y., & Kogan, A. (2018). Designing confidentiality-preserving blockchain-based transaction processing systems. International Journal of Accounting Information Systems, 30, 1-18. https://doi.org/10.1016/j.accinf.2018.06.001 google scholar
• Yermack, D. (2017). Corporate Governance and blockchains. Review of Finance, 21 (i), 7-31. google scholar
• Zhang, R., & Wen, J. (2023). The impact of regulatory announcements on DeFi token prices and bubble formations. Regulation & Governance, 17(i), 89-107. DOI: 10.111l/rego.12345 google scholar
• Zohar, A. (2015). Bitcoin: under the hood. Communications of the ACM, 58(9), 104-113. google scholar
• http://www.weidai.com/bmoney.txt google scholar
• http://www.coinmarketcap.com google scholar
• http://www.coingecko.com google scholar
• http://www.coindesk.com google scholar
• http://www.bloomberg.com google scholar
• http://www.forbes.com google scholar