Quantile dependencies and connectedness between the gold and cryptocurrency markets: Effects of the COVID-19 crisis

Abstract

This paper examines the quantile dependence, connectedness, and return spillovers between gold and the price returns of leading cryptocurrencies, using quantile cross-spectral, the return spillovers based the quantile VAR, and quantile connectedness approaches. The results show that the dependencies within cryptocurrencies are highly symmetric and sensitive to different quantile arrangements. Under normal market conditions, we find a high positive dependence within cryptocurrencies and a low positive dependence between cryptocurrencies and gold. The dependence is higher at long term than intermediate- and short- terms before the pandemic during bearish market conditions. In contrast, the degree of dependence decreases at the intermediate- and long-terms during COVID-19 period than before. Moreover, the magnitude of return spillovers is higher at lower quantile (bearish market) than upper quantile (bullish market). Gold serves as a safe haven and diversifier asset for cryptocurrencies during COVID-19 outbreak at both intermediate and long terms.