Cryptocurrencies and alternative bonds: Novel evidence on co-movement and risk sharing

In light of the rising macro-financial, geopolitical, and environmental risks, alternative assets such as cryptocurrencies, green bonds, and sukuk have received increasing attention for their potential in risk hedging and diversification. This study examines the dynamic return spillovers and risk-sharing interconnections among conventional and gold-backed Islamic cryptocurrencies, green bonds, and sukuk using daily data from 2018 to 2023. Employing a novel combination of frequency-based quantile connectedness and quantile cross-spectral techniques, we investigate time- and frequency-dependent interconnections under varying market conditions. Our results are threefold: First, Islamic gold-backed cryptocurrencies, green bonds, and sukuk exhibit intense co-movement and risk-sharing, in contrast to conventional cryptocurrencies, which display differential patterns. Second, return spillovers and connectedness intensify significantly during market stress periods such as the COVID-19 pandemic and the Russia–Ukraine war, with Islamic gold-backed cryptocurrencies showing stronger resilience and hedging potential than conventional cryptocurrencies. Third, return spillovers are more pronounced in the short term compared to the long term, potentially driven by liquidity flows, investor behavior, and high-frequency trading. Our findings suggest important implications for investors, fund managers, regulators, and policymakers.