The Reflection of Cryptocurrencies Prices Volatility on US Financial Markets as a Factor in Investment Portfolio Optimization: An Experimental Study in The American Financial Markets

The research aims to provide a comprehensive overview of the theoretical frameworks that define the nature of the relationship between volatility of cryptocurrencies and performance of financial market indices. It also aims to explain and analyze the mechanism of this potential influence on a sample of US financial markets for the period (2020-2024), by adopting the Autoregressive Distributed Lag (ARDL) methodology introduced by Pesaran et al. (2009). The research assessment results revealed the positive impact of Bitcoin and Tether on the performance of all US stock market indices, perhaps indicating that they act as an investment asset that supports financial market growth, especially in the long term. This suggests the possibility of considering Bitcoin and Tether as a guiding indicator for the performance of investment portfolios. In contrast, Ethereum’s negative performance on all indices suggests investors may shift away from it to other currencies or traditional assets. This may be interpreted as a potential hedging tool during certain periods, making it a haven during adverse market conditions. This indicates - as the research suggested - the need to develop clearer regulatory frameworks that allow Bitcoin and Tether to be integrated alongside traditional investment products in investment portfolios.