Infrastructure vs Regulatory Shocks: Asymmetric Volatility Response in Cryptocurrency Markets

Abstract

Infrastructure failures generate 5.7× larger volatility shocks than regulatory announcements in cryptocurrency markets (2.385% vs 0.419%, p=0.0008, Cohen's d=2.753). Using TARCH-X models with decomposed GDELT sentiment indices across 50 events (2019–2025) and 6 cryptocurrencies (BTC, ETH, XRP, BNB, LTC, ADA), we demonstrate that markets distinguish between mechanical-disruption events (exchange outages, protocol exploits) and expectation-channel events (enforcement actions, policy changes).