Vidal-Tomás, David; Aste, Tomaso; (2025) Integration or separation? Examining the dynamic relationship between crypto and traditional finance. Finance Research Letters , 86 (Part G) , Article 108927. 10.1016/j.frl.2025.108927.

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Abstract

Once a playground for tech enthusiasts, the crypto space has shifted to a financial field that is increasingly on policymakers’ radar due to the increasing adoption of crypto-assets, and also some significant crypto-related collapses. In this context, it is crucial to propose monitoring frameworks to assess the potential integration of the crypto sphere into traditional financial systems. We propose the use of the TVP-VAR approach as a strategic instrument for policymakers to analyze the connectedness between major financial markets and relevant crypto systems, such as the emerging centralized finance sector and the increasingly relevant decentralized finance ecosystem. Our findings indicate that the financial integration between the crypto space and traditional financial markets remains weak. Nonetheless, we report a very slight increase in connectedness since 2020, suggesting that while the crypto space is still far from being fully integrated, it has begun to establish modest but persistent links with conventional financial markets.

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