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Correlation structure between fiat currencies and blockchain assets

Author

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  • Abakah, Emmanuel Joel Aikins
  • Wali Ullah, G M
  • Abdullah, Mohammad
  • Lee, Chi-Chuan
  • Sulong, Zunaidah

Abstract

This study examines the correlation between fiat currencies of the G7 and BRICS economies and non-fungible tokens (NFTs) and decentralized finance (DeFi). We use quantile-on-quantile regression (QQR) and the rolling window wavelet correlation (RWWC) method with data spanning from September 2020 to October 2023. The findings from the QQR indicate a heterogenous relationship between currencies and digital assets. Specifically, BRICS currencies are more correlated with NFTs, whereas DeFi is correlated with almost all currencies. Further, the RWWC results reveal a time-varying negative correlation pattern between fiat currencies and NFTs and DeFi.

Suggested Citation

  • Abakah, Emmanuel Joel Aikins & Wali Ullah, G M & Abdullah, Mohammad & Lee, Chi-Chuan & Sulong, Zunaidah, 2024. "Correlation structure between fiat currencies and blockchain assets," Finance Research Letters, Elsevier, vol. 62(PA).
    • Handle: RePEc:eee:finlet:v:62:y:2024:i:pa:s1544612324001442
    DOI: 10.1016/j.frl.2024.105114
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    More about this item

    Keywords

    Fiat currencies; NFTs; DeFi; correlation; wavelet; QQR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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