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Abstract Systematic risks in cryptocurrency markets have recently increased and have been gaining a rising number of connections with economics and financial markets; however, in this area, climate shocks could be a new kind of impact factor. In this paper, a spillover network based on a time-varying parametric-vector autoregressive (TVP-VAR) model is constructed to measure overall cryptocurrency market extreme risks. Based on this, a second spillover network is proposed to assess the intensity of risk spillovers between extreme risks of cryptocurrency markets and uncertainties in climate conditions, economic policy, and global financial markets. The results show that extreme risks in cryptocurrency markets are highly sensitive to climate shocks, whereas uncertainties in the global financial market are the main transmitters. Dynamically, each spillover network is highly sensitive to emergent global extreme events, with a surge in overall risk exposure and risk spillovers between submarkets. Full consideration of overall market connectivity, including climate shocks, will provide a solid foundation for risk management in cryptocurrency markets.
Guo et al. (Thu,) studied this question.
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