Measuring the Impact of Cybersecurity Breaches on Bitcoin Returns

Digital exchanges, which convert funds between national currencies and cryptocurrencies, are often the victims of cybersecurity attacks. We investigate the impact of such cybersecurity breaches on bitcoin returns. Using several alternative specifications we test the hypothesis that bitcoin returns experience a decrease on the dates associated with cybersecurity breaches of cryptocurrency exchanges. We find a negative impact where bitcoin declines between 1.288\% and 1.470\% on cyberattack days, depending on which model is applied and what control variables are included. Our finding sheds light on this important but not widely recognized source of cryptocurrency market risk