The forking effect

Jean-Guillaume Dumas (1) , Sonia Jimenez-Garces (2) , Mathis Mourey (2, 3) , Florentina Șoiman (1, 2)

1 CASC - Calcul Algébrique et Symbolique, Sécurité, Systèmes Complexes, Codes et Cryptologie
2 CERAG - Centre d'études et de recherches appliquées à la gestion
3 The Hague University of Applied Sciences

This study introduces the concept of the forking effect in the cryptocurrency market, specifically focusing on the impact of forking events on bitcoin, also called parent coin. We use a modified exponential GARCH model to examine the bitcoin’s response in returns and volatility. Our findings reveal that forking events do not significantly affect the bitcoin’s returns but have a strong positive impact on its volatility, especially when considering market dynamics. Our model accounts for key features like volatility clustering and fat-tailed distributions. Additionally, we observe that following a fork event, volatility remains elevated for the next three days, regardless of other forking events, and the volatility impact does not increase when multiple forks occur simultaneously on the same day.

Mots clés: Cryptocurencies; Blockchain; Fork; EGARCH; Bitcoin

Domaines: Cryptographie et sécurité [cs.CR]

Jean-Guillaume Dumas, Sonia Jimenez-Garces, Mathis Mourey, Florentina Șoiman. The forking effect. 2021. ⟨hal-03216121v1⟩