Understanding the Connectedness between Traditional Assets and Green Cryptocurrencies During Crises

Abstract

This research explores the dynamic interaction between conventional financial assets, the US dollar index, S&P 500, gold, and crude oil, and ten major green cryptocurrencies, focusing on spillover linkages and hedging capacities during the COVID-19 pandemic and the Russia-Ukraine conflict. Using daily data and the Quantile-Vector Autoregressive methodology, the study reveals significant spillover effects from green cryptocurrencies to traditional financial instruments. Algorand, Cardano, IOTA, Powerledger, and TRON are notably influential, with Powerledger being a consistent transmitter across both crises. Conventional assets, particularly gold, act as effective hedging tools, especially in bear markets. Crude oil is identified as the largest transmitter of spillover impacts during conflicts. The study highlights that green cryptocurrencies promoting trust, innovation, and renewable energy are better hedged by traditional investments than those focused on financial services, underscoring their risky yet rewarding potential during economic crises.

Keywords: Commodities, Stock Markets, Cryptocurrencies, Dynamic connectedness, Crises.