Extreme connectedness between cryptocurrencies and non-fungible tokens : portfolio implications

We analyze the connectedness between major cryptocurrencies and nonfungible tokens (NFTs) for diferent quantiles employing a time-varying parameter vector autoregression approach. We fnd that lower and upper quantile spillovers are higher than those at the median, meaning that connectedness augments at extremes. For normal, bearish, and bullish markets, Bitcoin Cash, Bitcoin, Ethereum, and Litecoin consistently remain net transmitters, while NFTs receive innovations. However, spillover topology at both extremes becomes simpler-from cryptocurrencies to NFTs. We fnd no markets useful for mitigating BTC risks, whereas BTC is capable of reducing the risk of other digital assets, which is a valuable insight for market players and investors.