Time-frequency comovements between news sentiments, Non-fungible tokens, and DeFi assets: evidence from the wavelet analysis

Shoaib Ali, Umar Kayani and Imran Yousaf

Applied Economics, 2025, vol. 57, issue 53, 8999-9018

Abstract: Growth in digitalization has created a potential boost for Non-fungible tokens (NFTs) and decentralized finance (DeFis) assets in the modern world. Therefore, this study aims to examine the comovement between the recently developed comprehensive measure of news sentiment index (NSI) and selected digital assets. For this purpose, we have utilized the wavelet transform, wavelet correlation, and wavelet coherence econometric model to assess interdependency in both time and frequency between news sentiments and digital assets. Our wavelet correlation and covariance results suggest that almost all the digital assets exhibit a negative relationship with NSI. Moreover, the wavelet coherence results confirm that there is no significant comovement in the short to medium-term horizon, suggesting that both NFTs and DeFi can be used as hedges against the NSI. Furthermore, we observe small patches of significant negative comovement between NSI and digital assets in the long term, which correspond to the initial days of COVID-19. Our results confirm selected digital assets’ hedging role against news-driven uncertainty. This study finding provides essential information to policymakers, international investors, and investment managers to make effective decisions.

Date: 2025
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DOI: 10.1080/00036846.2024.2405659

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