<abstract xmlns="http://www.w3.org/1999/xhtml"><p>This paper examines the impact of Libra on volatility of Bitcoin using the classical framework of C. G. Lamoureux and W. D. Lastrapes (1990). ARCH and GARCH effects disappear when lagged ICO funding size is included in the variance equation. A negative association between volatility and funding size and the disappearance of volatility persistence (long-term volatility effect) suggest that Libra, as a dominant new currency, is likely to stabilize the cryptocurrency market and enhance potential for currency diversification. Furthermore, it is revealed that the stability cannot be ensured merely by backing decentralized blockchain instruments, such as Bitcoin, with bank deposits, government securities or exchange rate.</p></abstract>

This paper examines the impact of Libra on volatility of Bitcoin using the classical framework of C. G. Lamoureux and W. D. Lastrapes (1990). ARCH and GARCH effects disappear when lagged ICO funding size is included in the variance equation. A negative association between volatility and funding size and the disappearance of volatility persistence (long-term volatility effect) suggest that Libra, as a dominant new currency, is likely to stabilize the cryptocurrency market and enhance potential for currency diversification. Furthermore, it is revealed that the stability cannot be ensured merely by backing decentralized blockchain instruments, such as Bitcoin, with bank deposits, government securities or exchange rate.

Possible Impact of Facebook’s Libra on Volatility of Bitcoin: Evidence from Initial Coin Offer Funding Data

Management of Organizations: Systematic Research

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

This paper examines the impact of Libra on volatility of Bitcoin using the classical framework of C. G. Lamoureux and W. D. Lastrapes (1990). ARCH and GARCH...

Possible Impact of Facebook’s Libra on Volatility of Bitcoin: Evidence from Initial Coin Offer Funding Data

Published Online: Oct 30, 2019

Page range: 87 - 100

Received: Jun 27, 2019

Accepted: Aug 14, 2019

DOI: https://doi.org/10.1515/mosr-2019-0006

Keywords
bitcoin, cryptocurrency, Facebook’s Libra, ICO funding size, GARCH (1,1), ARCH and GARCH effects

© 2019 Chamil W. Senarathne, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Possible Impact of Facebook’s Libra on Volatility of Bitcoin: Evidence from Initial Coin Offer Funding Data

Published Online: Oct 30, 2019

Page range: 87 - 100

Received: Jun 27, 2019

Accepted: Aug 14, 2019

DOI: https://doi.org/10.1515/mosr-2019-0006

Keywordsbitcoin, cryptocurrency, Facebook’s Libra, ICO funding size, GARCH (1,1), ARCH and GARCH effects

© 2019 Chamil W. Senarathne, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
bitcoin, cryptocurrency, Facebook’s Libra, ICO funding size, GARCH (1,1), ARCH and GARCH effects