Dynamic volatility connectedness among cryptocurrencies and China's financial assets in standard times and during the COVID-19 pandemic

Abstract

In this paper, we use the time-varying parameter vector autoregressions (TVP-VAR) model to examine volatility connectedness among 5 cryptocurrencies and 5 China's financial assets in static and dynamic scenarios. We find that the dynamic total connectedness of the system exhibits large dynamic variability. When the total connectedness breaks through 50%, it will move down rapidly. Ethereum and Litecoin are increasing their influence, whereas Bitcoin is losing its leadership. The impact of the cryptocurrency market on China's financial market has become very small since 2022Q1. Furthermore, the COVID-19 outbreak has a long-term (short-term) impact on the gold market (the other markets).