From wars to dynamic waves: Scrutinizing connectedness between geopolitical risk index, green and non-green crypto volatility by quantile spillovers

Abstract

This research is crucial to determine if green cryptocurrencies are a geopolitical safe-haven or a speculative risk. This finding directly informs investor strategy, guides regulatory policy on financial stability, and advances financial theory by testing if ESG credentials provide resilience against systemic shocks. Our research uses a QVAR methodology to assess the network connectivity of nine metrics, which include the Geopolitical Risks Index (GPR), Cardano (ADA), NANO (XNO), Ripples (XRP), IOTA, Stellar Lumens (XLM), Bitcoin (BTC), Tron (TRX), and Ethereum (ETH). Our results show that when the complete dataset is considered, all of the analyzed variables are very moderately connected. This research specifically displays a temporal change in systemic connection as a result of the COVID-19 pandemic and the dispute between Ukraine and Russia. The results show that changes to the overall network could account for 68.83 % of the volatility in the framework of indicators being investigated. However, this figure has dramatically decreased to 61.47 % and 7.36 % both momentarily and over time. The net total directional connectivity across quantiles indicates that the Geopolitical Risks Index is a net transmitter of shocks throughout the 2020–2021 period below the 20 % quantile, while the Geopolitical Risks Index transmits most of the shocks in 2022 below the 20 % quantile. Ethereum is a primary net transmitter of shocks throughout our sample over quantiles. Dynamic net pairwise directional connectivity over a quantile indicates that unforeseeable occurrences like the COVID-19 outbreak or the tension between Ukraine and Russia affect Geopolitical Risks Indexs and green and non-green cryptocurrencies.