Macquarie University
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Investigating the impact of cyber security attacks on cryptocurrency markets

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posted on 2022-11-22, 01:16 authored by Seung Ah Lee

Cryptocurrency markets have grown significantly since the introduction of Bitcoin in 2008. Currently, there are more than 500 cryptocurrency exchanges worldwide and over 19,700 different cryptocurrencies which trade across various markets. While cryptocurrency trading is possible via peer-to-peer transactions, more than 90 percent of trading occurs on organised exchanges. Therefore, centralised cryptocurrency exchanges have become high-value targets to hackers and other types of criminal activity. In this thesis, I investigate two aspects of risk associated with cyberattacks on digital exchanges. First, I study the risk of cryptocurrency exchange closures and attempt to predict which markets will remain active given publicly available data on their key characteristics, including cybersecurity measures. I construct predictive models which reach training set accuracy of up to 95.9 percent, and up to 85.7 percent accuracy when applied to independent test data. In terms of feature importance, I find that transaction volume, exchange lifetime and cyber security measures such as security audit, cold storage and bug bounty programs rank high in their contribution to the predictability of exchange closures. Second, I examine the impact of cybersecurity breaches of cryptocurrency exchanges on the return of Bitcoin. Using several alternative specifications, I test the hypothesis that Bitcoin returns experience a decrease on the dates associated with cybersecurity breaches of digital markets. I find a negative and statistically significant impact at the 5 percent level, where Bitcoin price declines between 1.29 and 1.47 percent on cyberattack days, depending on which model is applied and what control variables are included. 


Table of Contents

1 Introduction -- 2 Literature review -- 3 Data description -- 4 Methodology -- 5 Results and discussion -- 6 Conclusions


A thesis submitted in partial fulfilment of the requirement for the degree of Master of Research

Awarding Institution

Macquarie University

Degree Type

Thesis MRes


Thesis (MRes), Macquarie University, Macquarie Business School, Department of Actuarial Studies and Business Analytics, 2022

Department, Centre or School

Department of Actuarial Studies and Business Analytics

Year of Award


Principal Supervisor

George Milunovich

Additional Supervisor 1

Colin Zhang


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