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Table 4 analyzes the determinants of this default probability, which is regressed against the intra-day volatility of Bitcoin and USDT, as well as daily returns of Bitcoin. Both Bitcoin volatility and USDT volatility are positively associated with default risk. Whereas a 100 basis point increase in Bitcoin volatility increases the probability of default by 4.3 basis points, a 100 basis point increase in USDT volatility increases it by 21.2 basis points. When we include both variables, only Bitcoin volatility is significant.

Table 4.

Determinants of the probability of run risk

IIIIIIIV
PPPP
σBTC 0.0433***   0.0415*** 
 (0.0060)   (0.0064) 
σUSDT  0.2124***  0.0856 
  (0.0702)  (0.0697) 
RBTC   −0.0033 0.0008 
   (0.0034) (0.0033) 
Intercept 15.7474*** 27.6135*** 30.6252*** 15.0208*** 
 (2.5363) (1.8240) (1.5617) (2.6165) 
R2 0.11 0.02 0.00 0.12 
No. observations 410 410 409 409 
IIIIIIIV
PPPP
σBTC 0.0433***   0.0415*** 
 (0.0060)   (0.0064) 
σUSDT  0.2124***  0.0856 
  (0.0702)  (0.0697) 
RBTC   −0.0033 0.0008 
   (0.0034) (0.0033) 
Intercept 15.7474*** 27.6135*** 30.6252*** 15.0208*** 
 (2.5363) (1.8240) (1.5617) (2.6165) 
R2 0.11 0.02 0.00 0.12 
No. observations 410 410 409 409 

Note: This table regresses the probability of default p on intra-day volatility of Bitcoin (BTC), Tether/USD (USDT), and BTC returns. The dependent variable in columns (I) through (IV), p, measures the probability of default. The sample runs from 28 February 2020 to 1 June 2021. White heteroscedasticity-robust standard errors are in parentheses. ***Statistically significant at the 1 percent level.

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