Professor Andrés Urquhart is Professor of Finance and Financial Technology and Head of the Department of Finance at Birmingham Business School (BBS).
This is the tenth installment of Professor Coin’s column, in which I contribute important ideas from the academic literature published on cryptocurrencies toward Decipher readership. In this article, I look at how cryptocurrencies’ relationship with stocks has evolved.
Not long ago, bitcoin It was marketed as the ultimate diversifier: an asset supposedly immune to what happened in the stock markets. Early academic work supported this: Liu and Tsyvinski (2021) showed that major cryptocurrencies had minimal exposure to standard stock, bond, and currency risk factors, and that their returns were primarily driven by crypto-specific forces such as momentum and investor attention, not by stock markets.
Fast forward to the last few years and the story looks very different. There is a growing body of literature finding that cryptocurrencies and stocks are closely intertwined, especially during times of stress. For a fintech audience, the key message is simple: cryptocurrencies can no longer be treated as an “off-grid” risk. It is increasingly behaving like a high-beta tech sector, with nasty tail behavior on top.
A recent Adelopo survey et al (2025) and coauthors review the evidence on how cryptocurrencies interact with traditional financial markets. They document clear, time-varying, and non-linear links between the cryptocurrency and stock markets, with particularly strong connections during major macro and geopolitical events such as COVID-19 or the Russia-Ukraine war.
Studies that specifically analyze technology and block chain-The linked actions confirm it. Omar et al (2021) finds a strong connection between cryptocurrency markets and the technology sector, while Frankovic (2022) shows that Australian “crypto-linked stocks” experience significant return repercussions from cryptocurrency prices, especially for companies most involved in blockchain activity. In other words, listed stocks are now a channel for transmitting crypto risk.
Several recent articles make the “crypto ↔ equity” link very explicit:
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Global spillover effects: Vuković (2025) uses a Bayesian global VAR to show that adverse shocks originating in the cryptocurrency market depress stock markets, bond indices, exchange rates, and volatility indices in a broad set of countries, not just the US.
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Co-movement between stocks and cryptocurrencies: Ghorbel and his co-authors (2024) study the connection between major cryptocurrencies, G7 stock indices, and gold. They find that cryptocurrencies have become important senders and receivers of shocks, with stronger ties to stocks in recent years and particularly during turbulent periods.
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US and Chinese stock markets: leaf et al (2024) examine spillovers between US and Chinese stocks, cryptocurrencies, and gold. They find important dynamic contagion effects of cryptocurrency risk in these stock markets, again concentrated in episodes of high volatility.
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Contagion at the exchange rate: sajeev et al (2022) document a Bitcoin contagion effect on major stock exchanges (NSE India, Shanghai, London and Dow Jones), using volatility spillover and correlation analysis between 2017 and 2021.
International organizations tell a similar story. An IMF departmental paper on “Spillovers between crypto and stock markets” concludes that Bitcoin shocks can explain a non-trivial proportion (approximately 10% percent) of the variation in global stock volatility, and that this influence has strengthened over time as institutional and derivatives markets have matured.
The common conclusion: cryptocurrencies are now firmly entrenched in the global risk ecosystem.
Professor Coin: How crypto derivatives have impacted digital markets
Why does Bitcoin now look so much like a high-beta tech stock?
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Duration and sensitivity to interest rates: Both crypto and growth stocks are essentially claims on uncertain future cash flows or network value. When real rates rise, discount factors hit hard and both sectors sell together.
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Investor base and leverage: Retail trading, momentum strategies and derivatives are widely used in both areas. Products like futures, options, and leveraged ETFs allow shocks in one market to be magnified and replicated in the other.
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Institutional portfolio construction: As cryptocurrencies have been added to multi-asset and hedge fund portfolios, their returns inevitably become entangled with traditional asset positioning. When funds remove risk, everything in the “risk bucket” disappears together.
Professor Coin: Are Managed Crypto Funds Outperforming the Market?
For portfolio construction, the message is uncomfortable but clear:
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Cryptocurrencies diversify in quiet periods; correlations may still be modest in benign regimes.
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But during stressful situations, when diversification is more valuable, correlations and contagion effects increase.
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Bitcoin and major altcoins behave less like “digital gold” and more like leveraged proxies for global risk sentiment.
That doesn’t make cryptocurrencies useless as an investment, but it does mean that treating a 5-10% crypto allocation as “uncorrelated upside” is no longer defensible based on the data.
Looking ahead, an open question for academics and practitioners alike is whether spot ETFs and broader institutional adoption will further tighten these links, or whether a new use case (such as genuine adoption of payments or settlements) might again create more idiosyncratic drivers.
For now, the evidence points in one direction: when global markets catch a cold, cryptocurrencies no longer sit on the sidelines: they cough along with everything else.
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Adelopo, I., et al. (2025). “Interconnection between cryptocurrencies and financial markets: a review.” Financial innovation. SpringerLink
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Frankovic, J. (2022). “On the spillover effects between cryptocurrency-linked stocks and cryptocurrencies.” Global Finance Magazine54, 100719. https://doi.org/10.1016/j.gfj.2021.100719 IDEAS/RePEc
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Ghorbel, A., et al. (2024). “Connectivity between cryptocurrencies, gold and stock markets: a network approach.” European Journal of Management and Business Economics33(4), 466–489. economist
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IMF (2022). Contagion effects between cryptocurrency and stock markets. IMF departmental document. IMF Electronic Library IMF+1 Electronic Library
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Lamine, A., et al. (2024). “Impacts between cryptocurrencies, gold and stock markets.” Journal of Economics, Finance and Administrative Sciences29(57), 21–40. Emerald
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Liu, Y. and Tsyvinski, A. (2021). “Risks and benefits of cryptocurrencies.” Review of Financial Studies34(6), 2689–2727. https://doi.org/10.1093/rfs/hhaa113 OUP Academic
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Sajeev, K.C. et al. (2022). “Contagion effect of cryptocurrencies in the stock market.” Journal of economic studies49(7), 1390-1410. PubMedCentral
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Umar, Z., Kenourgios, D., and Papathanasiou, S. (2021). “Connectivity between the cryptocurrency and technology sectors: evidence from implied volatility indices.” Financial research letters38, 101492. Direct Science
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Vuković, DB et al. (2025). “Overflows between cryptocurrencies and financial markets.” Magazine of international money and finance150, 102963. IDEAS/RePEc
