Integration and Risk Transmission Dynamics Between Bitcoin, Currency Pairs, and Traditional Financial Assets in South Africa

Benjamin Mudiangombe Mudiangombe () and John Weirstrass Muteba Mwamba
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Benjamin Mudiangombe Mudiangombe: School of Economics, University of Johannesburg, P.O. Box 524, Auckland Park 2006, South Africa
John Weirstrass Muteba Mwamba: School of Economics, University of Johannesburg, P.O. Box 524, Auckland Park 2006, South Africa

Econometrics, 2025, vol. 13, issue 3, 1-30

Abstract: This study explores the new insights into the integration and dynamic asymmetric volatility risk spillovers between Bitcoin, currency pairs (USD/ZAR, GBP/ZAR and EUR/ZAR), and traditional financial assets (ALSI, Bond, and Gold) in South Africa using daily data spanning the period from 2010 to 2024 and employing Time-Varying Parameter Vector Autoregression (TVP-VAR) and wavelet coherence. The findings revealed strengthened integration between traditional financial assets and currency pairs, as well as weak integration with BTC/ZAR. Furthermore, BTC/ZAR and traditional financial assets were receivers of shocks, while the currency pairs were transmitters of spillovers. Gold emerged as an attractive investment during periods of inflation or currency devaluation. However, the assets have a total connectedness index of 28.37%, offering a reduced systemic risk. Distinct patterns were observed in the short, medium, and long term in time scales and frequency. There is a diversification benefit and potential hedging strategies due to gold’s negative influence on BTC/ZAR. Bitcoin’s high volatility and lack of regulatory oversight continue to be deterrents for institutional investors. This study lays a solid foundation for understanding the financial dynamics in South Africa, offering valuable insights for investors and policymakers interested in the intricate linkages between BTC/ZAR, currency pairs, and traditional financial assets, allowing for more targeted policy measures.

Keywords: Bitcoin; TVP-VAR; integration; spillover; wavelet; network connectedness (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2025
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