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New Evidence on Spillovers Between Crypto Assets and Financial Markets

Author

Listed:
  • Roshan Iyer
  • Ms. Adina Popescu

Abstract

We analyze returns and volatility spillovers among a representative set of crypto and financial assets. The magnitude of spillovers increases during periods of heightened turbulence due to negative economic-financial news, crypto market events, or exogenous shocks. There is evidence of increasing spillovers over time, with a peak during the COVID-19 pandemic, implying growing interdependence. Crypto assets predominantly transmit spillovers to financial markets, though reversals occur during periods of financial stress. The increased correlation during risk-off episodes suggests that crypto assets could serve as important conduits for financial market shocks, generating financial stability risks.

Suggested Citation

  • Roshan Iyer & Ms. Adina Popescu, 2023. "New Evidence on Spillovers Between Crypto Assets and Financial Markets," IMF Working Papers 2023/213, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2023/213
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    Keywords

    Cryptocurrencies; Crypto assets; Bitcoin; Spillovers; Return and Volatility Connectedness; crypto market event; magnitude of spillover; volatility connectedness; crypto market; volatility spillover; Stock markets; Securities markets; COVID-19; Global;
    All these keywords.

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