Title: Investigating the spillover effects of Bitcoin's financial fluctuations on other digital currencies

Authors: Naeim Shokri; Amir Roshanfekr

Addresses: Tarbiat Modares University, Tehran, Iran ' Master of Information Technology Management, Science and Research Branch, Islamic Azad University, Tehran, Iran

Abstract: The purpose of this study is to investigate the effects of volatility spillover from Bitcoin as the largest digital currency on selected digital currencies. Volatility spillovers are a warning for risk management among cryptocurrencies and are especially instructive during periods of crisis. We investigate the effects of volatility spillover between digital currencies through the conditional covariance matrix. The findings show that Bitcoin had the highest volatility spillover on Dogecoin, Dash, and Ripple among digital currencies, respectively, and had the lowest volatility spillover on Ethereum. Bitcoin is used more as an asset than a currency and the Bitcoin market is more volatile than other currencies and prone to potential price bubbles. Based on the results, the bubbles in the digital currency market show that the market is irrational and due to the speculative behaviour of investors and the excitement of the Bitcoin market, it is causing economic instability.

Keywords: financial volatility spillover; digital currencies; multivariate GARCH approach.

DOI: 10.1504/IJBC.2023.131643

International Journal of Blockchains and Cryptocurrencies, 2023 Vol.4 No.1, pp.65 - 79

Received: 02 Nov 2022
Accepted: 23 Jan 2023
Published online: 21 Jun 2023 *