Examining the effect of threat of intervention in crypto market: A case study of bitcoin and ripple

In recent years, the volatility in the prices of most cryptocurrencies has increased relative to other currencies or securities. This thesis is concerned with the investigation of the threat of intervention in the cryptocurrency market and how it may lead to changes that affect the price and volume return volatility of the currencies under study with the formulation of the Threshold or GJR-GARCH model to assess the volatility of Bitcoin and XRP prices and volumes returns in the market. The data set begins from 1 January 2014 to 15 February 2021. Our results from the GJR-GARCH model shows a negatively significant relationship between news shocks and Bitcoin's price returns volatility, whereas the relationship between news shocks and XRP's price returns volatility isn't significant. On the other hand, volume returns of XRP have a positively significant relationship with news shocks whilst volume returns of Bitcoin do not have a significant relationship. Past shocks and conditional variance shocks are all significant determinants of today's return volatility. These findings confirm that, Ripple Company controls the prices of XRP from surging by keeping the coin off the market. Investors of Bitcoin don't pay much attention to shocks because they always believe Bitcoin will gain its value, hence higher risks yield higher gains.