Tracing Contagion between Bitcoin and Traditional Markets

Grigorios Rapos () and Stylianos Fountas ()
Additional contact information
Grigorios Rapos: Department of Economics, University of Macedonia
Stylianos Fountas: Department of Economics, University of Macedonia

Discussion Paper Series from Department of Economics, University of Macedonia

Abstract: This study investigates the presence of contagion between Bitcoin and four traditional assets (stocks, bonds, gold, and the U.S. dollar exchange rate) over the period 2015-2024. By implementing a framework that combines the DCC-GARCH specification and a time-varying causal inference methodology, we investigate periods of financial contagion. Overall, our findings support that Bitcoin remains weakly connected to the global financial markets. Our main results are as follows: First, among all assets, Bitcoin significantly Granger causes only the U.S. dollar exchange rate during the post-2021 sample period. Second, Bitcoin is Granger caused by the stock market and the US dollar exchange rate. Third, there is evidence for rare contagion episodes running from Bitcoin to the U.S. dollar exchange rate, while there is no evidence of contagion from Bitcoin to all other assets (stocks, bonds, and gold). Fourth, sporadic contagion also applies from the stock market to Bitcoin, mostly in May 2022. Our evidence implies that Bitcoin may be used as a useful portfolio diversification instrument.

Keywords: Bitcoin; Contagion; Time-varying causality; DCC-GARCH. (search for similar items in EconPapers)
JEL-codes: C32 C58 G10 G15 (search for similar items in EconPapers)
Date: 2025-02, Revised 2025-02
References: Add references at CitEc
Citations:

Downloads: (external link)
http://econwp.uom.gr/pdf/dp022025.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mcd:mcddps:2025_02

Access Statistics for this paper

More papers in Discussion Paper Series from Department of Economics, University of Macedonia
Bibliographic data for series maintained by Theodore Panagiotidis () and Anastasia Litina ().