The Anatomy of Cryptocurrency Connectedness

This paper uses a novel econometric framework to dissect connectedness into lagged effects - spillovers - and contemporaneous effects - correlations. The results based on a sample of the largest cryptocurrencies show that spillovers play a marginal role for connectedness compared with correlations. The findings provide new information about the economic significance of spillovers in comparison to correlations. We also find increased correlations during the COVID-19 outbreak consistent with contagion but no significant increase in spillovers.