Industrial metal and cryptocurrency market plummets: Interdependence, policy uncertainty, or investor sentiments?

John Kingsley Woode (), Anokye M. Adam, Peterson Owusu Junior and Anthony Adu-Asare Idun
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John Kingsley Woode: University of Cape Coast
Anokye M. Adam: University of Cape Coast
Peterson Owusu Junior: University of Cape Coast
Anthony Adu-Asare Idun: University of Cape Coast

Economia e Politica Industriale: Journal of Industrial and Business Economics, 2024, vol. 51, issue 4, No 8, 1040 pages

Abstract: Abstract This study examines the interdependence between industrial metals and cryptos, particularly during the recent downturn in both markets. Focusing on the most impacted and comparatively volatile cryptos (Bitcoin, Dashcoin, Ethereum, Litecoin, and Monero) and industrial metals (aluminium, copper, lead, nickel, and zinc) from January 2017 to December 2023, the study employs all varying wavelet techniques. The study confirms the dynamic interdependence structure between the sample metals and cryptos through the bivariate analysis, with events like the global health crisis and the crypto and metal markets crash playing significant roles. The partial wavelet analysis highlights the influence of investor sentiments and U.S. policy uncertainty in these integrations, extremely affecting Bitcoin, Dashcoin, and metal integrations. Regarding predictiveness, there was an observed bidirectional causal nexus, with metals dominating cryptos in most cases. Additionally, industrial metals are identified as a hedge for cryptos only in the very long term, given the observed weak integration, especially in normal times, while the multiple analyses revealed heightened integration and a lack of these prospects across all scales. In the same vein, Bitcoin demonstrated its vulnerability to both systemic and external shocks, with Ethereum being the most resilient asset with the prospect of withstanding such shocks. These outcomes have implications for investors, speculators, crypto-dependent businesses, crypto markets regulating countries, guiding policies, diversification strategies, and risk management.

Keywords: Industrial metals; Cryptocurrencies; Interdependence; Market plunge; Wavelets; Uncertainty; Investor sentiments (search for similar items in EconPapers)
JEL-codes: G01 G10 G11 G15 H12 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s40812-024-00315-2

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