Abstract
The emergence of cryptocurrencies sparked interest in the field of economics, with many authors having different views of how the markets behave under different conditions. While many studies on the topic analyse how the markets react to specific events, they do not analyse the impact of heterogeneous events and how they impact price discovery of the market and individual coins. This paper aims to bridge the gap by analysing the impact of heterogeneous events on the cryptocurrency market. In essence, the study investigates this by answering three questions. First, to investigate if there are significant abnormal returns (AR) because of heterogenous events. Second to examine which of the heterogenous events affects the cryptocurrency the most. Thirdly, to analyse if heterogenous events affects the cryptocurrencies the same way and to what magnitude and direction. The paper employed the events study analysis and used the single index model (SIM) to analyse the impact of heterogenous events. Daily data from 29 December 2018-20 July 2022 was used to analyse how the four major cryptocurrencies, Bitcoin (BTC), Binance Coin (BNB), Ethereum (ETH) and Tether (USDT) react to the heterogeneous events (the COVID-19 pandemic [COVID-19], hacking incidents and monetary policy announcements). The results show that most of the events examined generate statistically significant cumulative abnormal returns (CARs) across cryptocurrencies, providing evidence that heterogeneous events exert a significant impact on cryptocurrency returns. USDT as a stable coin showed to be the only coin that was insignificantly impacted by heterogenous events, while BNB and BTC were the most volatile coins, ETH was found to be context specific. These results showed that cryptocurrencies are not homogeneously affected by events and their reactions to systemic and idiosyncratic shocks are conditioned by their functional roles. Furthermore, the results showed that, of the heterogeneous events employed, monetary policy announcements were found to exert the most impact on the cryptocurrency market, therefore showing huge significant positive and negative CAARs in the market. The findings indicate that the cryptocurrency market does not exhibit semi-strong form efficiency, as statistically significant abnormal returns (ARs) and cumulative abnormal returns (CARs) were observed following the announcement of heterogeneous events. Furthermore, the results suggest that certain cryptocurrencies display safe-haven characteristics during periods of economic instability, as evidenced by positive and significant CARs during systemic shock events such as the COVID-19 pandemic. The results showed significant positive CARs and CAARs during COVID-19 and two of the hacking occurrences, therefore illustrating the markets’ ability to rebound following negative news and sentiments. Hence, because of negative sentiments, this suggested a flight to safety from traditional to the cryptocurrency...