What do responses of financial markets to the collapse of FTX say about investor interest in cryptocurrencies? Event-study evidence

Abstract

Studying the impact of the collapse of FTX on financial markets, we identify that, while this event was important to cryptocurrency markets, it was mostly irrelevant to traditional assets. Bitcoin, ethereum, and binance responded significantly negatively, while equity, energy, and currency markets were largely unmoved. Gold and silver having significant positive returns suggests cryptocurrency investors fled to purported safe havens. Results are consistent with traditional investors already having evolved to indifference to cryptocurrencies during the bear market prior to the FTX collapse. Results also suggest that cryptocurrencies are likely not as important a concern to financial stability as previously regarded.