Dynamic Stochastic Volatility Spillover Between Bitcoin and Precious Metals

Abstract

Since its creation in 2008, Bitcoin has often been compared to precious metals due to their shared characteristics as safe havens, hedges, and risk diversification tools. This study uses the DCC-GARCH model to analyze dynamic conditional correlations and volatility spillovers between Bitcoin and the returns of gold, copper, silver, and platinum. The findings reveal persistent volatility and clustering in the returns of both Bitcoin and these metals. There is a one-way volatility spillover from gold to Bitcoin, and from Bitcoin to copper, silver, and platinum. Significant dynamic conditional correlations are observed between Bitcoin and both gold and copper, while no significant correlations are found with silver and platinum. These results provide valuable insights for portfolio diversification strategies and inform policymaker decisions in financial markets.