Are DeFi tokens a separate asset class from conventional cryptocurrencies?

Corbet, Shaen; Goodell, John W.; Günay, Samet; Kaşkaloğlu, Kerem

doi:10.1007/s10479-022-05150-z

Cited by 30 publications

(14 citation statements)

References 64 publications

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“…This implies that the diversification benefits of DeFi for currency markets will be more prominent in the medium and long term. Several other papers, such as , Corbet et al (2023) and Cevik et al (2022), have concluded that there is a similar lessened nexus between DeFi and other financial markets in the long term.…”

Section: Discussionmentioning

confidence: 87%

“…As a result, it is crucial to determine whether assets other than currency markets and digital finance can benefit Islamic investors and portfolio managers who hold Islamic currencies from diversification (Hassan et al, 2023;Hassan et al, 2022b;Tien and Hung, 2022). Although empirical research between digital finance markets and major foreign exchange markets has been somewhat scarce until recently, many theoretical interlinkages connect them (Corbet et al, 2023;Yousaf et al, 2023aYousaf et al, , 2023b. Previous publications demonstrated that DeFi assets have a poor link with major currency markets, setting monetary policy, financial market channels or other common factors that affect both markets at the same time.…”

Section: Dynamic Impact Of Defimentioning

confidence: 99%

“…Modeling the time-varying connectedness of DeFi and other assets is a significant and new subject to look into due to recent developments in the rise of integration between equity markets. Different articles use a wide range of methodologies and report that DeFi and nonfungible tokens are very weakly connected to traditional assets, namely, GCC and BRICS stocks (Bejaoui et al , 2023), oil, gold, Bitcoin, the S&P 500 (Yousaf and Yarovaya, 2022; Piñeiro-Chousa et al , 2022; Yousaf et al , 2023a), natural resource markets (Cevik et al , 2022) and cryptocurrency markets (Karim et al , 2022; Corbet et al , 2023).…”

Section: Related Literaturementioning

confidence: 99%

“…Despite the necessity to understand the price dynamics of conventional assets for policy formation and trade, studies on DeFi assets are fairly few (Ghosh et al, 2023). Research has been implemented to gauge the relationship of DeFi with the prices of traditional financial markets (Bejaoui et al, 2023;Yousaf and Yarovaya, 2022;Piñeiro-Chousa et al, 2022;Yousaf et al, 2023aYousaf et al, , 2023bCevik et al, 2022;Karim et al, 2022;Corbet et al, 2023). Nevertheless, despite the fact that GCC foreign currency forward markets are the most traded hedging and liquidity management products in the region (Almaskati, 2022), we are not aware of any research that investigates the link between these markets and DeFi.…”

Section: Introductionmentioning

confidence: 99%

“…Decentralized finance (DeFi) has become a viable alternative financial system that might completely restructure the way that digital financial markets operate in the future (Ali et al , 2023). According to Corbet et al (2023), DeFi might include online wallets, borrowing, lending, margin trading, derivatives, spot trading and the provision of interest-earning assets. Hence, DeFi entails a time- and money-consuming total reconstruction of the current centralized financial system (Ali et al , 2023).…”

Section: Introductionmentioning

confidence: 99%

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An empirical analysis of the dynamic impact of DeFi on GCC foreign exchange forward markets: portfolio implication

Tien,

Dang,

Hung

2023

IMEFM

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Purpose This paper aims to investigate the conditional equicorrelation and cross-quantile dependence between the DeFi, European and GCC currency markets (Oman, Qatar, Bahrain, Kuwait, Saudi Arabia and the United Arab Emirates). Design/methodology/approach This study applies the GARCH-DECO model and cross-quantilogram framework. Findings The findings reveal evidence of weak and negative average equicorrelations between the examined markets through time, excluding the COVID-19 outbreak and Russia–Ukraine conflict, which is consistent with the literature examining relationships in different markets. From the cross-quantilogram model, the authors note that the dependence between DeFi, EURO and GCC foreign exchange rate markets is greatest in the short run and diminishes over the medium- and long-term horizons, indicating rapid information processing between the markets under consideration, as most innovations are transmitted in the short term. Practical implications For the pairs of DeFi and currency markets, the static and dynamic optimal weights and hedging ratios are also estimated, providing new empirical data for portfolio managers and investors. Originality/value To the best of the authors’ knowledge, this is one of the most important research looking into the conditional correlation and predictability between the DeFi, EURO and GCC foreign exchange markets. More importantly, this study provides the first empirical proof of the safe-haven, hedging and diversification qualities of DeFi, EURO and GCC currencies, and this work also covers the COVID-19 pandemic and the Russia–Ukraine war with the use of a single dynamic measure produced by the GARCH-DECO model. In addition, the directional predictability between variables under consideration using the cross-quantilogram model is examined, which can be capable of capturing the asymmetry in the quantile dependent structure. The findings are helpful for both policymakers and investors in improving their trading selections and strategies for risk management in different market conditions.

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Section: Discussionmentioning

confidence: 87%

Section: Dynamic Impact Of Defimentioning

confidence: 99%

Section: Related Literaturementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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An empirical analysis of the dynamic impact of DeFi on GCC foreign exchange forward markets: portfolio implication

Tien,

Dang,

Hung

2023

IMEFM

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What drives the return and volatility spillover between DeFis and cryptocurrencies?

Assaf,

Demir,

Ersan

2024

Int. J Fin Econ

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In this paper, we study the return and volatility connectedness between cryptocurrencies and DeFi Tokens, considering the impact of different uncertainty indices on their connectivity. Initially, we estimate a TVP‐VAR model to obtain the total connectedness between the two markets. We find that returns on the cryptocurrencies transmit significantly larger shocks and, thus, are responsible for most variations in the majority of DeFis' returns. Then, to analyse the impact of uncertainty on total return and volatility connectedness, we use four factors, namely, Economic Policy Uncertainty (EPU), The Chicago Board Options Exchange Volatility Index (VIX), Infectious Disease Equity Market Volatility Tracker (ID‐EMV) and Geopolitical Risks (GPR). We find that except for geopolitical risks, all three measures have a positive impact on return and volatility connectedness, while GPR exerts a negative impact. Finally, we provide implications for researchers, market participants and policymakers.

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A note on the determinants of non‐fungible tokens returns

Panagiotidis,

Papapanagiotou

2024

Int. J Fin Econ

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We aim to identify the determinants of non‐fungible tokens non‐fungible tokens (NFTs) returns. The 10 most popular NFTs based on their price, trading volume, and market capitalisation are examined. Twenty‐three potential drivers of the returns of each NFT are considered. We employ a Bayesian LASSO model which takes into account stochastic volatility and leverage effect. The results indicate that NFTs returns are primarily driven by volatility and ethereum returns. We find a weak connection between NFTs returns and conventional assets, such as stock, oil, and gold markets.

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Are DeFi tokens a separate asset class from conventional cryptocurrencies?

Cited by 30 publications

References 64 publications

An empirical analysis of the dynamic impact of DeFi on GCC foreign exchange forward markets: portfolio implication

An empirical analysis of the dynamic impact of DeFi on GCC foreign exchange forward markets: portfolio implication

What drives the return and volatility spillover between DeFis and cryptocurrencies?

A note on the determinants of non‐fungible tokens returns

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