Extreme connectedness between cryptocurrencies and non-fungible tokens: portfolio implications

Waild Mensi (), Mariya Gubareva (), Khamis Hamed Al-Yahyaee (), Tamara Teplova () and Sang Hoon Kang ()
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Waild Mensi: Sultan Qaboos University
Mariya Gubareva: Universidade de Lisboa
Khamis Hamed Al-Yahyaee: Muscat University
Tamara Teplova: National Research University Higher School of Economics/HSE University
Sang Hoon Kang: Pusan National University

Financial Innovation, 2024, vol. 10, issue 1, 1-27

Abstract: Abstract We analyze the connectedness between major cryptocurrencies and nonfungible tokens (NFTs) for different quantiles employing a time-varying parameter vector autoregression approach. We find that lower and upper quantile spillovers are higher than those at the median, meaning that connectedness augments at extremes. For normal, bearish, and bullish markets, Bitcoin Cash, Bitcoin, Ethereum, and Litecoin consistently remain net transmitters, while NFTs receive innovations. However, spillover topology at both extremes becomes simpler—from cryptocurrencies to NFTs. We find no markets useful for mitigating BTC risks, whereas BTC is capable of reducing the risk of other digital assets, which is a valuable insight for market players and investors.

Keywords: Cryptocurrencies; Nonfungible tokens; Extreme quantile connectedness; Time-varying parameter vector autoregression; TVP-VAR approach (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1186/s40854-023-00586-z

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