Green Cryptos Amplify Risk in Sustainable Markets: Pusan Study

A new study from Pusan National University delves into the interaction between green cryptocurrencies and traditional green financial assets during market stress. The researchers, led by Professor Sang Hoon Kang, used a quantile vector autoregression framework to examine risk transmission across sustainable markets. The analysis revealed a striking U-shaped pattern in market connectedness, with interactions between green cryptocurrencies and traditional green assets moderate under stable conditions but increasing sharply during both downturns and booms.

Portfolio analysis suggested that traditional green assets provide limited hedging effectiveness against green cryptocurrency volatility. Among the studied cryptocurrencies, Cardano and Stellar emerged as significant transmitters of volatility across the sustainable finance ecosystem. In contrast, green bonds, clean energy indices, and ESG investments acted as net receivers of volatility.

The study's findings challenge the traditional perception that green financial assets function as reliable safe-haven investments. Major global events strengthened connections between green cryptocurrency markets and traditional green assets, with market interconnectedness increasing during the COVID-19 pandemic and subsequent geopolitical disruptions.