The narrative of the rollercoaster day for cryptocurrency markets centers around the fears of stricter regulation in China (which might want to push its future CBDC). I shamlessy take the opportunity to advertise some of my prior work [1/n] #EconTwitter
ft.com/content/c4c29b…
ft.com/content/c4c29b…
In Borri and Shakhnov (FRL 2019) we look at a similar big shock when China de facto ordered the closing of cryptocurrency exchanges. [2/n]
Link to paper: sciencedirect.com/science/articl…
Link to paper: sciencedirect.com/science/articl…
The shock had a huge effect on the global share of trading volume that took place on Chinese cryptocurrency exchanges: in a matter of months it went from 90% to less than 1% (caveat: part of it could have been wash trading) [3/n] 
In the paper, we also document large international spillovers associated with the shock: a) volume moved rapidly to exchanges in other countries (for example, Korea and Japan); b) volume on Chinese p2p exchanges soared (these are harder to regulate) [4/n]
Our main takeaway is that changes in domestic regulation of cryptocurrency markets have strong international spillovers and that investors adapt quickly to the new regulatory environment [5/n]
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