Directional predictability from central bank digital currency to cryptocurrencies and stablecoins |
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| Affiliation: | 1. Center of Research for Energy and Climate Change (CRECC), Paris School of Business, France;2. University of Paris 8, France;3. Laboratory of Applied Economics and Finance, University of Carthage, Tunisia - Paris School of Business, France;4. Higher Institute of Finance and Taxation Sousse - Laboratory of Applied Economics and Finance, University of Carthage, Tunisia - Center of Research for Energy and Climate Change (CRECC), France;5. Center of Research for Energy and Climate Change (CRECC), Paris School of Business, France |
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| Abstract: | This paper investigates the interaction and the directional predictability between the central bank digital currencies (CBDCs) and the major cryptocurrencies and stablecoins during the period between 17 May, 2019–31 December, 2021. To this aim, we employ the "Cross-Quantilogram” model, to examine how and whether the traditional digital currencies react to the CBDC uncertainty and attention shocks. Our findings suggest that CBDC uncertainty index is negatively related to cryptocurrency and stablecoin returns. Furthermore, the CBDC attention index is negatively associated with Bitcoin, Ethereum, XPR and Terra USD, however, it is positively related to Tether, Binance, USD Coin and Dai. Our results are useful for regulators, investors and policy makers, to understand and assess the potential effect of CBDC adoption news on the volatility of the stablecoins and traditional cryptos. |
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| Keywords: | CBDC Cryptocurrencies Stablecoins Directional predictability Cross-Quantilogram model |
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