New Evidence on Spillovers Between Crypto Assets and Financial Markets

September 29, 2023

Preview Citation

Format: Chicago

Roshan Iyer, and Adina Popescu. New Evidence on Spillovers Between Crypto Assets and Financial Markets, (USA: International Monetary Fund, 2023) accessed December 22, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We analyze returns and volatility spillovers among a representative set of crypto and financial assets. The magnitude of spillovers increases during periods of heightened turbulence due to negative economic-financial news, crypto market events, or exogenous shocks. There is evidence of increasing spillovers over time, with a peak during the COVID-19 pandemic, implying growing interdependence. Crypto assets predominantly transmit spillovers to financial markets, though reversals occur during periods of financial stress. The increased correlation during risk-off episodes suggests that crypto assets could serve as important conduits for financial market shocks, generating financial stability risks.

Subject: COVID-19, Financial markets, Financial sector policy and analysis, Health, Securities markets, Spillovers, Stock markets

Keywords: Bitcoin, COVID-19, Crypto assets, Crypto market, Crypto market event, Cryptocurrencies, Global, Magnitude of spillover, Return and Volatility Connectedness, Securities markets, Spillovers, Stock markets, Volatility connectedness, Volatility spillover

Publication Details

Pages:

62
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/213
Stock No:

WPIEA2023213
ISBN:

9798400256622
ISSN:

1018-5941

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