A note on the relationship between stock market volatility and cryptocurrencies:New evidence from China - US trade frictions

In the context of the China-U.S. trade friction, we use the TVP-VAR model to examine the spillover volatility, hedging and safe-haven effects of cryptocurrencies based on daily data of Bitcoin (BTC), Ethereum (ETH), the CSI 300 Index, and the S&P 500 Index. Our findings reveal a significant short-term time-varying asymmetric volatility spillover effect between cryptocurrencies and the U.S. and Chinese stock markets. BTC and ETH can also be used as short-term hedging assets for the CSI 300 Index. Evidence also indicates no long-term correlation between cryptocurrencies and the stock market. Consequently, during periods of economic instability and volatility caused by trade frictions between the two countries, such as the imposition of high tariffs, investors can consider cryptocurrencies as short-term hedging assets and long-term safe-haven assets to mitigate losses caused by stock market fluctuations.