Dynamics of Cryptocurrencies, DeFi Tokens, and Tech Stocks: Lessons from the FTX Collapse

Nader Naifar () and Mohammed S. Makni
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Nader Naifar: Department of Finance, College of Business, Imam Mohammad Ibn Saud Islamic University (IMSIU), Riyadh 11432, Saudi Arabia
Mohammed S. Makni: Department of Finance, College of Business, Imam Mohammad Ibn Saud Islamic University (IMSIU), Riyadh 11432, Saudi Arabia

IJFS, 2025, vol. 13, issue 3, 1-23

Abstract: The FTX collapse marked a significant shock to global crypto markets, prompting concerns about systemic contagion. This paper investigates the dynamic connectedness between cryptocurrencies, DeFi tokens, and tech stocks, focusing on the systemic impact of the FTX collapse. We decompose total, internal, and external connectedness across asset groups using a time-varying parameter VAR model. The results show that post-FTX, Bitcoin and Ethereum intensified their roles as core shock transmitters, while Tether consistently acted as a volatility absorber. DeFi tokens exhibited heightened intra-group spillovers and occasional external influence, reflecting structural fragility. Tech stocks remained largely insulated, with reduced cross-market linkages. Network visualizations confirm a post-crisis fragmentation, characterized by denser internal crypto-DeFi ties and weaker inter-group contagion. These findings have important policy implications for regulators, investors, and system designers, indicating the need for targeted risk monitoring and governance within decentralized finance.

Keywords: cryptocurrencies; decentralized finance (DeFi) tokens; FTX collapse; decomposed connectedness (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2025
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