Crypto and Equities Interlinked: Insights on Market Dynamics and Stress Behavior
Cryptocurrency markets and equities are closely intertwined, particularly under market stress, with crypto often behaving like a high-beta technology sector. Research by Adelopo et al. (2025) highlights time-varying and non-linear linkages between crypto and stock markets, which become strongest during macroeconomic and geopolitical shocks such as the COVID-19 pandemic and the Russia–Ukraine conflict. Umar et al. (2021) find strong connectedness between cryptocurrencies and the technology sector, while Franković (2022) identifies significant spillovers from crypto to Australian cryptocurrency-linked stocks.
Vuković (2025), employing a Bayesian Global VAR model, finds that shocks in crypto markets depress stock, bond, exchange-rate, and volatility indices across many countries. Similarly, Ghorbel et al. (2024) show cryptocurrencies act as both senders and receivers of shocks, with stronger ties to equities during turbulent periods. Lamine et al. (2024) document spillovers from crypto to U.S. and Chinese equities and gold, concentrated during episodes of high volatility. Sajeev et al. (2022) report a contagion effect of Bitcoin on major indices including NSE India, Shanghai, London, and Dow Jones from 2017 to 2021. An IMF (2022) departmental paper indicates that Bitcoin shocks explain roughly mid-teens percent of variation in global equity volatility, with influence strengthening as markets develop.
These findings suggest that while cryptocurrencies may provide some diversification during calm markets, their correlations with equities spike during stress, reflecting a shared risk sentiment. Consequently, a typical 5–10% allocation to crypto may not offer uncorrelated upside during turbulent times. Open questions remain as to whether the introduction of spot ETFs and broader institutional adoption will further tighten these linkages or whether new use-cases might create idiosyncratic drivers for crypto markets.
