Evaluating the Systemic Risk of the Cryptocurrency Market Using the Threshold Approach

Mehrara, Mohsen; Abdoli, Qahreman; Akhondi, Heidar

doi:10.22075/jem.2024.34058.1932

Evaluating the Systemic Risk of the Cryptocurrency Market Using the Threshold Approach

Document Type : Original Article

Authors

¹ Professor in Economics, Department of Economics, University of Tehran

² Ph.D. Student in Financial Economics, Aras international campus of University of Tehran

10.22075/jem.2024.34058.1932

Abstract

One of the most important topics and issues raised in the financial markets is the awareness of the systemic risk of the market because it plays a significant role in the decision making of investors. The purpose of this study is to estimate the threshold limit of the systemic risk of the cryptocurrency market in the period of 2017-2023. In this regard, the CoVaR method was used to estimate the systemic risk. Also, in order to estimate the effects of the systemic risk threshold limit, threshold soft transition regression (TSTR) was used. The statistical population of the present study is the cryptocurrency market and the statistical sample includes Bitcoin, Tether and Ether. The results showed that the systemic risk in Bitcoin is much higher than that of Ethereum. In addition, it was observed that there were threshold effects in the estimated systemic risk index for cryptocurrencies.

Keywords

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