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Understanding digital bubbles amidst the COVID-19 pandemic: Evidence from DeFi and NFTs.


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.

SUBMITTER: Maouchi Y 

PROVIDER: S-EPMC9653299 | biostudies-literature | 2022 Jun

REPOSITORIES: biostudies-literature

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Understanding digital bubbles amidst the COVID-19 pandemic: Evidence from DeFi and NFTs.

Maouchi Youcef Y   Charfeddine Lanouar L   El Montasser Ghassen G  

Finance research letters 20211208


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 exace  ...[more]

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