Understanding digital bubbles amidst the COVID-19 pandemic: Evidence from DeFi and NFTs

Youcef Maouchi; Lanouar Charfeddine; Ghassen El Montasser

doi:10.1016/j.frl.2021.102584

Understanding digital bubbles amidst the COVID-19 pandemic: Evidence from DeFi and NFTs

Financ Res Lett. 2022 Jun:47:102584. doi: 10.1016/j.frl.2021.102584. Epub 2021 Dec 8.

Authors

Youcef Maouchi¹, Lanouar Charfeddine¹, Ghassen El Montasser²

Affiliations

¹ Department of Finance and Economics, College of Business and Economics, Qatar University, Qatar.
² ESCT school of Tunis, University of Manouba, Tunisia.

Abstract

This paper investigates digital financial bubbles amidst the COVID-19 pandemic. Using a sample of 9 DeFi tokens, 3 NFTs, Bitcoin, and Ethereum, we detect several bubbles overlapping the examined cryptoassets. We also uncover DeFi and NFT-specific bubbles in Summer 2020 suggesting distinct driving factors for this class of assets. We document that DeFi and NFTs bubbles are less recurrent but have higher magnitudes than cryptocurrencies' bubbles. We also find that COVID-19 and trading volume exacerbate bubble occurrences, while Total Value Locked (TVL) is negatively associated with cryptoassets' bubbles. Our results suggest that TVL can be used as a tool for market monitoring.

Keywords: COVID-19; DeFi; Digital bubbles; NFTs; Real-time detection; Total Value Locked.