Understanding digital bubbles amidst the COVID-19 pandemic: Evidence from DeFi and NFTs
Youcef Maouchi, Lanouar Charfeddine, Ghassen El Montasser
Abstract
This paper investigates digital financial bubbles amidst the COVID-19 pandemic. Using a sample of 9 DeFi tokens, 3 NFTs, Bitcoin, and Ethereum, we detect several bubbles overlapping the examined cryptoassets. We also uncover DeFi and NFT-specific bubbles in Summer 2020 suggesting distinct driving factors for this class of assets. We document that DeFi and NFTs bubbles are less recurrent but have higher magnitudes than cryptocurrencies' bubbles. We also find that COVID-19 and trading volume exacerbate bubble occurrences, while Total Value Locked (TVL) is negatively associated with cryptoassets' bubbles. Our results suggest that TVL can be used as a tool for market monitoring.
Topics & Concepts
PandemicCoronavirus disease 2019 (COVID-19)Cryptocurrency2019-20 coronavirus outbreakSevere acute respiratory syndrome coronavirus 2 (SARS-CoV-2)Economic bubbleBubbleSample (material)EconometricsEconomicsBusinessMonetary economicsComputer scienceMedicineInternal medicineComputer securityVirologyChemistryChromatographyInfectious disease (medical specialty)OutbreakDiseaseParallel computingBlockchain Technology Applications and SecurityMarket Dynamics and VolatilityComplex Systems and Time Series Analysis