IDEAS home Printed from https://ideas.repec.org/a/eee/reveco/v101y2025ics1059056025003879.html
   My bibliography  Save this article

Spillover dynamics between green and non-green cryptocurrencies: Unrevealing the role of geopolitical risk

Author

Listed:
  • Mejri, Sami
  • Jareño, Francisco
  • Khan, Nasir
  • Leccadito, Arturo

Abstract

This study examines the impact of geopolitical risk (GPR) on black and green cryptocurrencies during crisis times, focusing on their potential as hedging instruments and safe havens. Using daily data on nine cryptocurrencies (Bitcoin, Ethereum, Binance, Litecoin, Ripple, EOS, IOTA, Stellar and Tezos) and the Geopolitical Risk Index from January 3rd, 2019, to January 20th, 2025, the research employs a Regime-Switching Global Vector Autoregressive (RSGVARX) model and a quantile-on-quantile (QQ) approach to capture heterogeneous responses across market states and quantiles. In addition, the Dynamic Conditional Correlation (DCC) GARCH copula and Dynamic Gerber Correlation (DGC) models assess the hedging effectiveness and optimal portfolio weights of various cryptocurrency pairs. The study uniquely combines the RSGVARX and QQ methods to provide a comprehensive understanding of the dynamic interactions between GPR and cryptocurrency returns and introduces robust portfolio optimisation analysis using advanced econometric models. The results show that the impact of GPR on black cryptocurrencies is generally negative and statistically insignificant in Regime 1, with mixed effects in Regime 2, while green cryptocurrencies show similar heterogeneous responses. Several cryptocurrencies show resilience to GPR shocks in certain scenarios, highlighting their potential as reliable assets in times of geopolitical instability. The portfolio optimisation analysis identifies Bitcoin paired with Ethereum, Binance and Litecoin as the most effective combination for hedging throughout the sample period and during the stressful Russia-Ukraine war and Israeli-Palestinian conflict. These results suggest that investors should consider market states and transition probabilities when developing portfolio strategies involving cryptocurrencies, providing valuable insights for managing risk and ensuring financial stability during geopolitical crises.

Suggested Citation

  • Mejri, Sami & Jareño, Francisco & Khan, Nasir & Leccadito, Arturo, 2025. "Spillover dynamics between green and non-green cryptocurrencies: Unrevealing the role of geopolitical risk," International Review of Economics & Finance, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:reveco:v:101:y:2025:i:c:s1059056025003879
    DOI: 10.1016/j.iref.2025.104224
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1059056025003879
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.iref.2025.104224?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:101:y:2025:i:c:s1059056025003879. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620165 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.