4. Concluding Remarks
In this study, I examine whether or not the Chinese ban of cryptocurrency transactions affected the overall volatility of the crypto market in the short-, medium, and long-term. To do this, I use both univariate and multivariate analyses that capture changes in volatility during the period immediately surrounding the ban. My findings show that in the five days before and after the ban, there is a clear economic and statistical impact on crypto volatility. When I increase the event window to the 10 days before and after the ban, the inferences change slightly. I find that there is only a moderate economic change in volatility in the medium term. Finally, to examine the longer-term effects of the ban, I explore the 40 days before and after the event. Here, I find that the effect on volatility decreases so low that there is little to no economic significance in the longterm. My conclusion is that while the news of the Chinese government banning crypto affected the stability of prices, the ban did not affect the long-term volatility of the marketplace.
Perhaps future studies might examine the effect of the ban on overall prices. As I show in Figure 1, the average crypto price decreases dramatically after the event and stays at this decreased level for at least 40 days. I would say that this requires further attention to see if I can find a causal relationship between this event and the price of cryptos when China announced the ban. This type of research might provide evidence of a longer-term price effect even though the change in volatility is transitory.