Contagion Effect between Commodities and Cryptocurrencies

This paper examines cryptocurrencies in terms of their diversifier, safe haven and/or hedge properties, while simultaneously testing the existence of contagion and spillover effects between cryptocurrencies (Bitcoin and Ethereum) and commodities (gold, silver, oil) during periods of global crises. The aim of the research is to determine the relationships between these assets and analyse the transmission of shocks in crisis conditions. The empirical analysis is conducted using daily returns from January 2019 to May 2023, employing the DCC-MGARCH, Kolmogorov-Smirnov test and Diebold-Yilmaz spillover index. The results show that cryptocurrencies mainly act as diversifiers. During stable periods, there are mild positive correlations between cryptocurrencies and commodities, while in crisis periods there is an increase in these correlations. Oil showed weak correlation with cryptocurrencies, while silver exhibited the strongest correlation among the commodities. No negative correlations are observed between the assets, which excludes the possibility of classifying cryptocurrencies as safe havens for observed commodities. For all pairs of the assets the contagion effect is present, with the distribution in crisis being stochastically dominant. In terms of spillover effect, it is confirmed that oil and cryptocurrencies act as net transmitters of shocks. Additionally, the wavelet coherence analysis confirms previous findings while concluding that in periods of turmoil cryptocurrencies act as catalysts of financial contagion, although not being direct sources of contagion.