{"title":"Connectedness between traditional finance, cryptocurrencies and DeFi in the post COVID period","authors":"Luz Parrondo , Carlo Sala","doi":"10.1016/j.frl.2025.106897","DOIUrl":null,"url":null,"abstract":"<div><div>This paper examines the post-COVID-19 dynamic return and volatility connectedness between Decentralized Finance (DeFi) assets, cryptocurrencies, and traditional financial markets. Through a comprehensive dynamic analysis, the study shows that after the spike in interconnectedness during the COVID-19 crisis, the linkages between these assets and traditional markets returned to generally low, pre-crisis levels. However, macroeconomic shocks, such as anticipated interest rate increases, occasionally disrupt this stability, temporarily intensifying market interconnections. The results indicate that while DeFi and cryptocurrencies may offer diversification benefits, their effectiveness might diminish when mostly needed.</div></div>","PeriodicalId":12167,"journal":{"name":"Finance Research Letters","volume":"76 ","pages":"Article 106897"},"PeriodicalIF":7.4000,"publicationDate":"2025-02-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Finance Research Letters","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1544612325001618","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
This paper examines the post-COVID-19 dynamic return and volatility connectedness between Decentralized Finance (DeFi) assets, cryptocurrencies, and traditional financial markets. Through a comprehensive dynamic analysis, the study shows that after the spike in interconnectedness during the COVID-19 crisis, the linkages between these assets and traditional markets returned to generally low, pre-crisis levels. However, macroeconomic shocks, such as anticipated interest rate increases, occasionally disrupt this stability, temporarily intensifying market interconnections. The results indicate that while DeFi and cryptocurrencies may offer diversification benefits, their effectiveness might diminish when mostly needed.
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