Work

A flight-to-safety from Bitcoin to stock markets: Evidence from cyber attacks

Year: 2025

Type: article

Abstract: We discover a novel flight-to-safety effect from cryptocurrency markets to stock markets.It occurs after a series of hacking attacks on crypto exchanges as greater uncertaintyheightens investors’ risk awareness and perception, which, in turn, inducesherd-like behaviour in favor of safer stock markets over riskier cryptocurrency markets.We extensively examine this effect worldwide across 39 countries and confirmthis novelty. This effect is amplified when investors’ risk awareness is strengthenedby frequent attacks. Intriguingly, the sentiment elicited from the attacks discussedon social media not only serves as a timely warning indicator for the forthcomingattack events, but also measures the flight-to-safety pressure after attack events.We conclude that the collapse of investors’ confidence is the primary cause of suchan effect. We investigate the abnormal flows of US mutual funds to determine theimpact of hacking events, with significant inflows providing clear evidence for flightto-safety hypothesis. Through the lens of cyber attacks, we document how a shock incrypto markets is transmitted into stock markets through investors’ flight-to-safetybehavior.

Source: International Review of Financial Analysis

DOI: 10.1016/j.irfa.2025.104093

Authors: Yang Fang, Cathy Yi-Hsuan Chen, Chunxia Jiang

Institutions: University of Westminster, University of Glasgow, University of Aberdeen

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,770

Funders: European Commission, National Natural Science Foundation of China, HORIZON EUROPE Framework Programme, H2020 Marie Skłodowska-Curie Actions