Project Description

BRL Working Paper Series

On this page, you can find all published working papers of the Blockchain Research Lab. Feel free to download them by clicking on the picture and share them.

A Place next to Satoshi – Foundations of Blockchain and Cryptocurrency Research in Business and Economics

October 2019 – Working Paper No. 4

Blockchain technology has become an ubiquitous phenomenon. While the topic originated in computer science, the business and economics literature was comparatively slow to pick up on it. To better understand the academic basis, current developments and future research avenues of the discourse, I analyse 467 blockchain and cryptocurrency articles and their 9,672 cited references from the fields of business and economics, which I gather from the Web of Science Core Collection. Five major strands of research are identified through factor analysis. They are reviewed and their interrelation is mapped using social network analysis. I find that research on I) market efficiency and economics and II) asset pricing and valuation is relatively mature and focuses on cryptocurrencies, while research on III) the principles and applications of blockchain technology, IV) transactions and anonymity and V) monetary theory and policy lacks maturity. I point out potential paths for future research and conclude that this young field of research still leaves plenty of room for manoeuvre. A scientific place next to Nakamoto (2008) is still available for existing, emerging and new research streams.

Market Reaction to Exchange Listings of Cryptocurrencies

September 2019 – Working Paper No. 3

Cryptocurrency markets operate at a global scale and are lightly regulated compared to traditional securities markets. Cryptocurrencies like Bitcoin trade across multiple secondary markets that differ significantly in term of liquidity, governance and trust. This study explores 327 exchange listings of 180 cryptocurrencies on 22 different cryptocurrency exchanges and examines the resulting price effects using event study methodology. The results show a significant average abnormal return of 5.7% on the day of the listing event and 9.2% in the window of three days before until three days after the listing. The effects clearly differ for individual cryptocurrency exchanges, with listings on only a few exchanges yielding significant positive short-term abnormal returns of up to 25.5% on the day of the listing. Other exchanges show no significant effects at all or even significant negative returns, which suggests informed trading or market manipulation. Additional tests show that higher market capitalization in combination with lower trading volume leads to higher abnormal returns at exchange listings of blockchain-based assets.

Discovering market prices: Which price formation model best predicts the next trade?

June 2019 – Working Paper No. 2

For most purposes of technical analysis, valuation metrics and many other relevant financial methods, the price of the last transaction is considered representative of the market price. The straightforward argument is that at this price, supply and demand have last met. However, on closer examination, the question arises as to why a past event should be relevant to the future, and why other, potentially more recent information should not be used to discover a future price. Building on this question, we apply a range of new price formation models to current data available on crypto currency exchanges that depict level II market data, and compare their short-term forecast accuracy against the common-used ticker price and mid-price. Data on crypto currencies is used as the closest example to free markets, since crypto currency trading is continuous, markets never close, and interferences through oversight is extremely rare. We find that two of the five price formation models investigated outperform the widely used ticker as a price indicator for the next trade. We conclude that the volume-limited clearing price best predicts the price of subsequent trades. Its usage can thus enhance the explanatory power of various financial analyses.

Cheap Signals in Security Token Offerings (STOs)

February 2019 – Working Paper No. 1

Blockchain-based security token offerings (STOs) provide a new way of crowdfunding and corporate financing. Building on signalling theory, this paper examines 1) whether companies conducting an STO make use of cheap signals to influence investment behaviour and 2) if such use of cheap signals is effective. We analyse a dataset of 151 STOs and identify that cheap signals of human capital and social media are used by projects and have a positive effect on funding success, while cheap signals of external network size negatively affect funding success. We argue that these signals can be exploited by STOs to influence investor behaviour raising concerns for investor protection.