Industrial metal and cryptocurrency market plummets: Interdependence, policy uncertainty, or investor sentiments?

This study examines the interdependence between industrial metals and cryptos, particularly during the recent downturn in both markets. Focusing on the most impacted and comparatively volatile cryptos (Bitcoin, Dashcoin, Ethereum, Litecoin, and Monero) and industrial metals (aluminium, copper, lead, nickel, and zinc) from January 2017 to December 2023, the study employs all varying wavelet techniques. The study confirms the dynamic interdependence structure between the sample metals and cryptos through the bivariate analysis, with events like the global health crisis and the crypto and metal markets crash playing significant roles. The partial wavelet analysis highlights the influence of investor sentiments and U.S. policy uncertainty in these integrations, extremely affecting Bitcoin, Dashcoin, and metal integrations. Regarding predictiveness, there was an observed bidirectional causal nexus, with metals dominating cryptos in most cases. Additionally, industrial metals are identified as a hedge for cryptos only in the very long term, given the observed weak integration, especially in normal times, while the multiple analyses revealed heightened integration and a lack of these prospects across all scales. In the same vein, Bitcoin demonstrated its vulnerability to both systemic and external shocks, with Ethereum being the most resilient asset with the prospect of withstanding such shocks. These outcomes have implications for investors, speculators, crypto-dependent businesses, crypto markets regulating countries, guiding policies, diversification strategies, and risk management.