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Connectedness between traditional finance, cryptocurrencies and DeFi in the post COVID period

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  • Parrondo, Luz
  • Sala, Carlo

Abstract

This paper examines the post-COVID-19 dynamic return and volatility connectedness between Decentralized Finance (DeFi) assets, cryptocurrencies, and traditional financial markets. Through a comprehensive dynamic analysis, the study shows that after the spike in interconnectedness during the COVID-19 crisis, the linkages between these assets and traditional markets returned to generally low, pre-crisis levels. However, macroeconomic shocks, such as anticipated interest rate increases, occasionally disrupt this stability, temporarily intensifying market interconnections. The results indicate that while DeFi and cryptocurrencies may offer diversification benefits, their effectiveness might diminish when mostly needed.

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  • Parrondo, Luz & Sala, Carlo, 2025. "Connectedness between traditional finance, cryptocurrencies and DeFi in the post COVID period," Finance Research Letters, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:finlet:v:76:y:2025:i:c:s1544612325001618
    DOI: 10.1016/j.frl.2025.106897
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    2. Remy Jonkam Oben & Aliya Zhakanova Isiksal, 2026. "Decentralized finance portfolio optimization: assessing green and brown investments before, during, and after COVID-19," Economic Change and Restructuring, Springer, vol. 59(2), pages 1-51, April.

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