Time-Varying and Frequency-Based Spillover Connectedness Between Cryptocurrencies and Non-ferrous Industrial Metals in Light of Market Plummets

We examined the dynamic connectedness between the most capitalized and tradable cryptos (Bitcoin, Binance, Dashcoin, Ethereum, Litecoin, Monero, Ripple, and Tether) and the most significant and highly traded non-ferrous industrial metals (aluminium, copper, lead, nickel, tin, and zinc) affected by the “nickel crash.” The study period spans January 2017 to December 2023 through the Baruník and Křehlík spillover index (BKSCI), with further insight from the TVP-VAR approach and the Diks and Panchenko causality test. Through the BKSCI, we revealed a feeble yet comparatively superior connectedness among the sample markets in the very short term, with the long term characterized by depleting influence. The result was marred by risk persistence with limited inter-asset transmissions, with cryptos (Tether Dashcoin, Ripple, and Binance) and metals (nickel, lead, and tin) being dominant, while nickel remains the only metal with the capacity to transmit shocks to Monero. Cryptos (Bitcoin, Ethereum, Litecoin, and Monero) transmit significant shocks amongst themselves, while the sample metals exhibited a similar pattern across varying frequencies, which further found substantiation through the TVP-VAR approach. The sampled markets, excluding Bitcoin, Ethereum, Tether, nickel, and zinc, acted as receivers of systemic shocks, with the aforementioned assets serving as transmitters with minor variations, particularly in the medium term. The study further infers the absence of contagion among the sample assets, which suggests diversification prospects given the limited cross-asset transmissions. These findings were corroborated by TVP-VAR, influenced by market-specific crises, including the crypto and nickel crashes, and several global events such as the pandemic, Brexit formalization, and the Russia-Ukraine conflicts. Further validation was provided through the nonlinear causality test of Diks and Panchenko, with a few exceptions. These results have implications for investors, speculators, crypto and metal market-regulating countries and firms, guiding policies, diversification strategies, and risk management.