Unveiling time-frequency linkages among diverse cryptocurrency classes and climate change concerns

Abstract

This study examines the interlinkages among diverse cryptocurrency classes and their multiscale relationship with media climate change concerns to examine how cryptocurrency returns respond to rising climate change concerns. The analysis includes 11 cryptocurrencies classified as dirty, gold-backed, energy, and sustainable and their behavior regarding media climate change concerns, including transition and physical risks. Using squared wavelet coherence and partial wavelet coherence (PWC) on daily data from January 1, 2014 to June 29, 2024, this study shows time-frequency-dependent market integration among cryptocurrency pairs. During rising climate change concerns, returns decrease for some cryptocurrencies while increasing for XRP, implying higher investors' trust in sustainable cryptocurrencies. PWC analysis reveals significant influence of climate change concerns on pairwise returns connectedness among various cryptocurrency classes. This study highlights the need for cryptocurrency traders to incorporate media climate change information into their investment decisions, contributing insights into using diverse crypto-assets for risk management. • We find high market integration after 2018 cryptocurrency crash. • PLG and gold-backed cryptos show weak dependence with respective cryptocurrencies. • Rising climate change concerns significantly increase PLG and XRP returns across time-frequency. • We find that transition risks predict cryptocurrency returns more than physical risks. • We find that climate change concerns drive cryptocurrency co-movements.