Quantile connectedness between cryptocurrency and commodity futures

Abstract

This study investigates the quantile dependence and spillovers for return and volatility of Bitcoin and futures of crude oil, copper, natural gas, and gold. We apply quantile vector autoregression and quantile connectedness approaches using a rolling-window method to examine spillover dynamics. The empirical results reveal that return spillovers increase when asset returns deviate from normal market conditions, and volatility spillovers are particularly increased during bullish market conditions. Moreover, the study finds that under bearish and normal market conditions, Bitcoin is a major recipient of return spillovers from all futures, and crude oil and copper are major transmitters of return spillovers to natural gas and gold, respectively. However, during bullish market states, Bitcoin becomes a major transmitter of return spillovers to other futures. Under unstable market conditions, gold is a major transmitter of volatility spillover to crude oil and natural gas. Furthermore, the directional link from Bitcoin to other futures is stronger when market issues exist.