Infrastructure vs Regulatory Shocks: Asymmetric Volatility Response in Cryptocurrency Markets

Abstract

Infrastructure failures generate 5.7× larger volatility shocks than regulatory announcements in cryptocurrency markets (2.385% vs 0.419%, p=0.0008, Cohen's d=2.753). Using TARCH-X models with decomposed GDELT sentiment indices across 50 events (2019–2025) and 6 cryptocurrencies (BTC, ETH, XRP, BNB, LTC, ADA), we demonstrate that markets distinguish between mechanical-disruption events (exchange outages, protocol exploits) and expectation-channel events (enforcement actions, policy changes).

Suggested Citation

BibTeX

@misc{farzulla2025_market_reaction_asymmetry,
  author       = {Farzulla, Murad},
  title        = {Infrastructure vs Regulatory Shocks: Asymmetric Volatility Response in Cryptocurrency Markets},
  year         = {2025},
  howpublished = {ASCRI Working Paper DAI-2506},
  doi          = {10.21203/rs.3.rs-8323026/v1},
  url          = {https://systems.ac/3/DAI-2506}
}

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