Volatility Spillovers between Bitcoin and Chinese Financial Markets

Abstract

In his paper we explore the dynamic time-frequency volatility spillover effects between Bitcoin and Chinese financial markets, covering several main events. Results show that the volatility spillovers are asymmetric, with the Bitcoin market being the net risk receiver. The total spillovers, driven by medium and low frequency components, peak before the China stock crash in 2015, increase since the trade disputes between China and the US in 2018, and peak since the COVID-19 pandemic. The pairwise spillovers related to Bitcoins mainly concentrate on stock, foreign exchange, and copper futures markets. Although the pairwise spillovers are weak, the Bitcoin market is the net receiver in medium and low frequencies under external shocks. Therefore, investors and regulators need to assess the potential risk of Bitcoin based on asset type with the perspectives of time and frequency.