The Spillovers between Cryptocurrencies and Conventional Currencies : A Look from Both Econometric and Deep Learning Perspectives

This study explores the dynamic and economic importance of the spillovers between the conventional currency market and the cryptocurrency market from September 2015 to June 2022. We employed both the widely used econometric spillover measure and a deep learning approach. The findings of this study were fourfold. First, cross-market spillovers are multilayered, signified by currencies’ heterogeneous reactions to different forms of spillovers. Second, the cross-market spillovers that currencies receive and emit are always asymmetric. Third, most cross-market spillovers present within a short frequency band and show strong short-term volatility, indicating that cross-market spillovers are strongly dynamic. Fourth, cross-market spillovers can cause non-negligible impacts on cryptocurrencies’ returns when cryptocurrencies’ prices exhibit significant explosive behavior. These findings shed light on the unstable safe-haven property of digital money and thus underscore the importance of timely market monitoring and analysis for both investors and policymakers