DIGITAL FINANCE UNDER GLOBAL SHOCKS: CRYPTOCURRENCY DEMAND IN TIMES OF CRISES AND SANCTIONS

Abstract

This study examines how global shocks reshape cryptocurrency demand, with particular attention to the role of digital finance as an adaptive mechanism under conditions of crisis and financial restriction. Using daily data for Bitcoin and Ethereum from 2018 to 2024, we develop a unified empirical framework that combines matched event-study analysis with dynamic demand modeling to distinguish between immediate market reactions and more persistent adjustment dynamics. The results show that financial crises generate stronger short-run increases in trading volume, turnover, and volatility than sanctions, indicating pronounced speculative responses to market-wide uncertainty. However, these effects fade quickly as information is absorbed. By contrast, sanctions targeting financial infrastructure produce weaker immediate reactions but are associated with more gradual and persistent changes in market conditions, especially through volatility dynamics. Once demand persistence is taken into account, both crisis and sanction shocks have limited direct effects on short-run trading activity, although cryptocurrency demand remains strongly path-dependent over time. Overall, the findings suggest that digital assets serve different functions under different types of global disruption: during crises, they primarily reflect short-lived speculative behavior, whereas under sanctions they increasingly operate as part of a broader process of digital financial adaptation. The study contributes to current debates on digital transformation and financial resilience in the new global economy by showing how cryptocurrencies respond to disruptions in traditional financial market.