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Speed of Adjustment in Digital Assets in a Decentralized Financial World

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  • Jeremy Eng‐Tuck Cheah
  • Thong Dao
  • Hung Do
  • Tapas Mishra

Abstract

This paper investigates the stability and co‐movement of cryptocurrency assets in Decentralized Finance (DeFi), with a focus on the Speed of Adjustment (SA), the rate at which shocks dissipate, and prices revert to long‐run equilibrium. SA provides a critical measure of market efficiency and portfolio allocation in a highly volatile DeFi environment. We extend conventional cointegration analysis by applying a Fractionally Cointegrated Vector Autoregressive framework, which captures slow error corrections. Rolling estimations generate a time‐varying series of SA, allowing examination of its evolution and cross‐asset spillovers. The results reveal multiple cointegrating relationships, heterogeneous adjustment speeds, and strong contagion effects among DeFi assets. For instance, RPL exhibits rapid yet volatile adjustment, while LDO, BAL, and SNX revert more slowly, reflecting distinct risk‐return trade‐offs. Spillover analysis highlights high systemic interconnectedness, underscoring challenges for diversification and contagion management. Overall, dynamic SA emerges as a valuable forward‐looking indicator of stability in digital asset markets.

Suggested Citation

  • Jeremy Eng‐Tuck Cheah & Thong Dao & Hung Do & Tapas Mishra, 2026. "Speed of Adjustment in Digital Assets in a Decentralized Financial World," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 46(2), pages 320-333, February.
    • Handle: RePEc:wly:jfutmk:v:46:y:2026:i:2:p:320-333
    DOI: 10.1002/fut.70055
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