Dependence structure between NFT, DeFi and cryptocurrencies in turbulent times: An Archimax copula approach

This paper investigates the connectedness among eighteen cryptocurrency assets including NFT, DeFi, gold-backed cryptocurrencies, and traditional cryptocurrencies. We also compute the Optimal hedge ratio for each pair of (gold-backed) cryptocurrency-NFT/DeFi and assess their hedge effectiveness. To...

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Bibliographic Details
Published in:The North American journal of economics and finance 2024-01, Vol.70, p.102079, Article 102079
Main Authors: Fakhfekh, Mohamed, Bejaoui, Azza, Bariviera, Aurelio F., Jeribi, Ahmed
Format: Article
Language:English
Subjects:
Archimax copula
DeFi
Hedge ratio
Non fungible token
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Summary:This paper investigates the connectedness among eighteen cryptocurrency assets including NFT, DeFi, gold-backed cryptocurrencies, and traditional cryptocurrencies. We also compute the Optimal hedge ratio for each pair of (gold-backed) cryptocurrency-NFT/DeFi and assess their hedge effectiveness. To this end, we use a combination of econometric methods. Our sample period goes from 01/11/2021 to 21/02/2023, making the empirical analysis insightful and interesting as it includes the Covid-19 health crisis and the Russia–Ukraine war. Our empirical findings highlight the dissimilarities between different cryptocurrencies in terms of connectedness with NFT/DeFi assets. They also reflect the diversification benefits generated by the inclusion of gold-backed cryptocurrencies into NFT/DeFi portfolios, in particular in times of unprecedented events. These findings could be useful for crypto-investors who search to diversify their portfolios. •Connectedness among eighteen cryptocurrency assets including NFT and DeFi.•Dissimilarities in terms of connectedness with NFT/DeFi assets.•Diversification benefits by including gold-backed cryptocurrencies into NFT/DeFi portfolios.•Archimax copula provides insightful information during turbulent periods.
ISSN:1062-9408
1879-0860
DOI:10.1016/j.najef.2024.102079