Financial stress shocks and digital asset performance across market conditions

Tran Phuoc and Ngo Thai Hung

Digital Transformation and Society, 2026, 1-21

Abstract: PurposeThis study examines the predictive capacity of the Financial Stress Index (FSI) for major digital asset categories - Bitcoin, DeFi tokens, and NFT tokens - across bearish, normal, and bullish market regimes.Design/methodology/approachWe deploy a rolling-window wavelet quantile Granger causality (RWWQGC) framework capturing time variation, frequency heterogeneity, and distributional asymmetries, supported by quantile-on-quantile regressions (QQR) for robustness.FindingsFSI predictability is state- and horizon-dependent. Under normal market conditions, predictive power stabilizes at lower frequencies. Conversely, in bearish and bullish regimes, predictability shifts toward higher frequencies. QQR estimates confirm nonlinear, asymmetric, and tail-dependent systemic risk transmission.Practical implicationsSystemic financial stress drives long-horizon portfolio rebalancing during normal market states, but induces short-term speculative trading in extreme regimes, offering direct implications for cross-asset hedging and macroprudential oversight.Originality/valueThis study extends the systemic risk literature across heterogeneous crypto segments through a unified time–frequency–quantile framework, uncovering state-contingent risk propagation overlooked by conventional linear models.

Keywords: Financial stress; Digital assets; Bitcoin; DeFi; NFTs; Wavelet quantile Granger causality; Quantile-on-quantile regression; Systemic risk (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eme:dtspps:dts-02-2026-0095

DOI: 10.1108/DTS-02-2026-0095

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