Do cryptocurrencies and traditional asset classes influence each other?

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract:Large stream of literature studies interconnectedness among various assets that are relevant in current global markets. Transmission of shocks between cryptocurrencies and traditional asset classes is, however, not understood at all, but should not be ignored due to increasing influence of cryptocurrencies in recent years. In this paper, we study how shocks between the most liquid representatives of the traditional asset classes including commodities, foreign exchange, stocks, financials, and cryptocurrencies are being transmitted. Generally, we document very low level of connectedness between the main cryptocurrency and other studied assets. The only exception is gold which receives substantial amount of shocks from cryptocurrency market. Our findings are important since we show that cryptocurrencies play role in global markets, and the results could also be useful in portfolio diversification schemes. Moreover, we find significant positive asymmetry in spillovers between the studied assets, which is in contradiction to previous studies conducted on assets from a single asset class.

Risk spillover between Bitcoin and conventional financial markets: An expectile-based approach

“…The Bitcoin market is not segmented, as previously argued. This finding is partially comparable to and Kurka (2019) who also uncover periods of significant shock transmission between Bitcoin and traditional assets. In fact, Kurka (2019) indicate that the increasing market value of Bitcoin reinforces the risk spillover from Bitcoin, leading to some disruptions to the financial system.…”

“…We find that the risk spillover varies with time, which is generally in line with the existing studies that generally show that the relationship between Bitcoin and other assets classes exbibits some time variation (e.g., Ji et al, 2018; 2019; Okorie and Lin, 2020) 2 . Secondly, we focus on downside risk spillovers rather than average spillovers or correlations, which represents a shift in the related literature (e.g., Ji et al, 2018;Symitsi and Chalvatzis, 2018;Kurka, 2019;Li and Huang, 2020).…”

Cryptocurrencies as an asset class in portfolio optimisation

“…In the meanwhile, Härdle, Chen and Overbeck (2017), Baur, Hong and Lee 2018and Kurka (2019) have made a conditional conclusion regarding the readiness to form a distinct crypto asset class. They have proved a high dependence of the crypto market on shocks, speculations, hacker attacks and regulation changes; so such events are expected to define the future of crypto assets.…”

Are cryptocurrencies connected to forex? A quantile cross-spectral approach

“…Reporting practically zero correlations, he argued that macroeconomic events that have similar impacts on the value of forex currencies do not seem to affect Bitcoin at all. Kurka (2017) documented very low connectedness between Bitcoin and other assets, including EUR/USD, JPY/USD, gold, crude oil, S&P 500, and US 2-year Treasury notes. The sample period was from June 2011 to December 2015.…”