The Bitcoin-agricultural commodities nexus: Fresh insight from COVID-19 and 2022 Russia–Ukraine war

Abstract

This paper investigates the volatility connectedness and dynamic time–frequency relationship between Bitcoin (BTC) and 15 major agricultural commodity markets during the COVID-19 and 2022 Russia–Ukraine war periods. We employ the TVP-VAR-based extended joint connectedness method, minimum connectedness investment portfolio, and wavelet coherence (WC) method. The results indicate that the sudden outbreaks of the two crises brought about increased volatility connectedness between BTC and agricultural commodity markets. Throughout the entire sample period, BTC remained a net transmitter of volatility. Moreover, in terms of the total connectedness index (TCI), the overall volatility correlation surged rapidly after the outbreak of COVID-19 and the 2022 Russia–Ukraine war. The portfolio results demonstrated that BTC exhibited a low correlation with the agricultural commodity markets, suggesting diversification potential. Additionally, only Feeder Cattle served as an effective hedging asset for BTC throughout all periods. The WC analysis confirmed that during the COVID-19 period and the 2022 Russia–Ukraine war, most of the linkages were primarily concentrated at medium- to long-term frequencies. Our analysis will contribute to a deeper understanding of the interconnection between these markets, enabling market participants to consider risk mitigation measures and support portfolio diversification when formulating policies and regulations involving relevant markets in the future.