This paper investigates the cryptocurrency network of the FTX exchange during the collapse of its native token, FTT, to understand how network structures adapt to significant financial disruptions, by exploiting vertex centrality measures. Using proprietary data on the transactional relationships between various cryptocurrencies, we construct the filtered correlation matrix to identify the most significant relations in the FTX and Binance markets. By using suitable centrality measures - closeness and information centrality - we assess network stability during FTX's bankruptcy. The findings document the appropriateness of such vertex centralities in understanding the resilience and vulnerabilities of financial networks. By tracking the changes in centrality values before and during the FTX crisis, this study provides useful insights into the structural dynamics of the cryptocurrency market. Results reveal how different cryptocurrencies experienced shifts in their network roles due to the crisis. Moreover, our findings highlight the interconnectedness of cryptocurrency markets and how the failure of a single entity can lead to widespread repercussions that destabilize other nodes of the network.

Information flow in the FTX bankruptcy: A network approach

Rizzini ,Giorgio.
2024

Abstract

This paper investigates the cryptocurrency network of the FTX exchange during the collapse of its native token, FTT, to understand how network structures adapt to significant financial disruptions, by exploiting vertex centrality measures. Using proprietary data on the transactional relationships between various cryptocurrencies, we construct the filtered correlation matrix to identify the most significant relations in the FTX and Binance markets. By using suitable centrality measures - closeness and information centrality - we assess network stability during FTX's bankruptcy. The findings document the appropriateness of such vertex centralities in understanding the resilience and vulnerabilities of financial networks. By tracking the changes in centrality values before and during the FTX crisis, this study provides useful insights into the structural dynamics of the cryptocurrency market. Results reveal how different cryptocurrencies experienced shifts in their network roles due to the crisis. Moreover, our findings highlight the interconnectedness of cryptocurrency markets and how the failure of a single entity can lead to widespread repercussions that destabilize other nodes of the network.
2024
Settore SECS-S/06 - Metodi mat. dell'economia e Scienze Attuariali e Finanziarie
Settore STAT-04/A - Metodi matematici dell'economia e delle scienze attuariali e finanziarie
Bankruptcy; Centrality measures; Cryptocurrency market; Decentralized finance; Complex networks
   PNRR Infrastrutture di Ricerca - SoBigData.it - Strengthening the Italian RI for Social Mining and Big Data Analytics.
   SoBigData.it
   Ministero della pubblica istruzione, dell'università e della ricerca
   IR0000013

   SoBigData++: European Integrated Infrastructure for Social Mining and Big Data Analytics.
   SoBigData-PlusPlus
   European Commission
   H2020
   871042
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11384/149583
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