Global stock market systemic risk and the asymmetric transmission to Bitcoin’s tail dynamics

This study investigates the asymmetric impact of global stock market systemic risk (GSMSR) on the conditional distribution of Bitcoin returns. We develop a robust GSMSR measure by applying the Tail-Event driven Network (TENET) methodology to G20 equity indices. A two-stage semi-parametric framework is then employed to model the dynamic response of Bitcoin’s return distribution across multiple forecasting horizons. Our results show that an increase in GSMSR significantly suppresses both extreme negative and positive Bitcoin returns; however, this effect exhibits mean reversion within a one-month horizon. To quantify Bitcoin’s time-varying vulnerability, we leverage an established framework of tail risk measures, including Downside/Upside Entropy and Expected Shortfall/Longrise, which capture risk dynamics from both relative and absolute perspectives. We find that Bitcoin’s downside risk is not only more volatile but also more sensitive to GSMSR fluctuations than its upside potential, with downside entropy exhibiting pronounced peaks during systemic crises while upside entropy remains relatively stable. Furthermore, over the longer term, these tail risks exhibit a clear “risk trade-off” pattern. Our findings provide new insights into the complex, nonlinear nature of risk transmission between traditional financial markets and cryptocurrencies.