Abstract
This paper studies the risk diffusion in the cryptocurrency market during the period from 2018 to 2021 based on the network analysis. By comparing the network topologies of cryptocurrency, stock and foreign exchange networks, we find that risks may diffuse more easily in the cryptocurrency market rather than traditional financial markets. We also measure the breadth and depth of risk diffusion for cryptocurrencies, and build panel regression models to identify what contributes to the risk diffusion. Our findings show that cryptocurrencies with large market capitalization, and others that experience decline in prices or low-turnover also contribute to the risk diffusion.
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