Interconnectivity among cryptocurrencies, NFTs, and DeFi: Evidence from the Russia-Ukraine conflict

Abstract

We examine the linkages between fifteen major cryptocurrencies, NFTs, and DeFi assets before and during the Russia-Ukraine military conflict, using the TVP-VAR framework. We observe a high level of spillovers in the pre-conflict period that persists during the military confrontation. However, the topology of network connectedness changes during the Russia-Ukraine conflict as several digital assets are seen to alter their status from net recipient to net transmitter and vice-versa. Additionally, we report that stronger transmitting and receiving spillovers vis-à-vis the full sample are observed during the Russia-Ukraine military conflict. Ethereum, Chainlink, Bancor, BAT, and Bitcoin (Decentraland, Maker, DigiByte, and XRP) are consistent transmitters (receivers) of return spillovers. Chainlink and BAT (Bitcoin and XRP) are consistent transmitters (receivers) of volatility innovations. We report that the cryptocurrencies, as an asset class, play an important role in the absorption of the volatility shock coming from NFTs and DeFi assets. The digital asset classes the least associated with one another are those in the pair DeFi-cryptocurrencies. The findings have valuable implications for investors, portfolio managers, and policymakers.