From scam to heist: the impact of cybercrimes on cryptocurrencies

• Main Author: Mohamad, Azhar
• Format: Article
• Language: English
• Published: Taylor & Francis 2024
• Subjects: HG Finance; HG221 Bitcoin/Cryptocurrency/Block Chain; HG4501 Stocks, investment, speculation
• Online Access: http://irep.iium.edu.my/113546/1/From%20scam%20to%20heist%20%20the%20impact%20of%20cybercrimes%20on%20cryptocurrencies.pdf; http://irep.iium.edu.my/113546/; https://www.tandfonline.com/doi/full/10.1080/13504851.2024.2384529; https://doi.org/10.1080/13504851.2024.2384529

We analyse the impact of cybercrime, particularly cryptocurrency heists and scams, on dynamic conditional correlations and abnormal returns in cryptocurrency. Our high-frequency, hourly data set covers three years, from January 2020 to December 2022, and our results show that certain hacking events have a negligible negative impact on investors, especially when focusing on less popular tokens or coins. This new perspective has significant implications for the investment community. Existing literature generally assumes that the impact of cybercrime is situational and argues for increased awareness, proactive cybersecurity measures and multi-stakeholder collaboration in traditional financial markets such as equities and currencies. However, the cryptocurrency market — a relatively young and still developing area — has a unique dynamic. Less popular tokens or coins often have lower market integration and liquidity, indicating a lower impact of cybercrime. If such a token or coin already has a limited reputation or investor base, the overall negative sentiment may be further mitigated, lessening the expected negative impact.