The Volatility Implications of the Chinese Cryptocurrency Ban

Abstract

In this paper, I examine the effect of the May 18th, 2021 Chinese ban of cryptocurrency transactions on the overall volatility of the cryptocurrency market. To do this, I analyze, in both univariate and multivariate settings, range-based volatility in various event windows surrounding the event. I find clear economic and statistical change in volatility in the five days after the ban. In the ten-day period after the ban, there is a moderate economic change in volatility. In the forty-day period after the ban, there is little economic change in volatility. I conclude that the Chinese ban had a clear short-term impact on the volatility of the cryptocurrency marketplace, but the effects wore off shortly thereafter.