Interconnectedness and Volatility Dynamics in Major Cryptocurrency Markets: A Study of LTC-USD, BTC-USD, BNB-USD, and ETH-USD

This study employs an asymmetric VAR(1)-multivariate GARCH(1,1)-BEKK approach to evaluate the returns, shock, and volatility spillovers for BTC-USD, LTC-USD, BNB-USD, and ETH-USD cryptocurrencies. The findings of the current study reveal significant interconnectedness in between currencies, and notable complementarity observation between BTC and ETH. Additionally, LTC and BNB exhibit an inverse impact on BTC and ETH returns, indicating their increasing popularity among investors. The variance equation analysis demonstrates that past shocks/news significantly affect all cryptocurrencies, with lower cross-news effects compared to internal news impacts. In addition to that, a significant short-term and long-term volatility spillovers are found among the four major cryptocurrencies market. Further, we find a substantial increase in the conditional volatility of the selected cryptocurrencies from April 2022 to November 2022. This research work emphasizes the significance of interconnectedness, and volatility dynamics of cryptocurrencies in portfolio management. Additionally, it provides suggestions for policymaking for effective risk management strategies and regulatory measures in market.