We investigate the presence of contagion between Bitcoin and four traditional assets (stocks, bonds, gold and the US dollar exchange rate) over the period 2015–2024.
We implement a framework that combines the DCC-GARCH specification and a time-varying causal inference methodology.
Our findings support that Bitcoin remains weakly connected to the global financial markets. Contagion is limited, appearing sporadically from S&P 500 to Bitcoin and from Bitcoin to the US dollar index. However, when we impose a stricter definition of extreme correlation or a multivariate VAR specification, the contagion results vanish, indicating no systematic contagion between Bitcoin and traditional assets.
Our evidence implies that Bitcoin may be used as a useful portfolio diversification instrument.
We deploy a recently developed novel methodology that combines the DCC-GARCH model and a recent time-varying Granger causality procedure to distinguish between extreme high correlation and contagion and find no evidence of systematic contagion effects of Bitcoin with conventional asset classes.
