Professor Coin: When Bitcoin Sneezes: How Crypto and Stocks Got the Same Cold

Professor Andrew Urquhart is Professor of Finance and Financial Technology and Head of the Department of Finance at Birmingham Business School (BBS).

This is the tenth installment of the Professor Coin column, in which I convey key insights from published academic literature cryptocurrencies to the Declutter readers. In this article, I discuss how crypto’s relationship with stocks has evolved.

Not so long ago, Bitcoin was marketed as the ultimate source of diversification – an asset that was supposedly immune to what was happening in the stock markets. Early academic work supported this: Liu and Tsyvinski (2021) showed that major cryptocurrencies had minimal exposure to standard stock, bond, and currency risk factors, and that their returns were driven primarily by crypto-specific forces such as momentum and investor attention, and not by stock markets.

Fast forward to the past few years, and that story looks very different. A growing literature now shows that crypto and stocks are closely intertwined, especially during times of stress. For a fintech audience, the key message is simple: you can no longer view crypto as an ‘off-grid’ risk. It’s behaving more and more like a high-beta tech sector, with some nasty tailgating on top of that.

From ‘uncorrelated’ to ‘just another risky asset’

A recent study by Adelopo et al (2025) and co-authors review the evidence on how cryptocurrencies interact with traditional financial markets. They document clear, time-varying and non-linear links between crypto and stock markets, with particularly strong connections during major macro and geopolitical events such as COVID-19 or the Russia-Ukraine war.

Studies that specifically look at technology and blockchain-linked shares confirm this. Omar et al (2021) finds a strong connection between cryptocurrency markets and the technology sector, while Frankovic (2022) shows that Australian “cryptocurrency-linked stocks” experience significant return spillovers from crypto prices, especially for companies more closely involved in blockchain activity. In other words, listed stocks are now a transmission channel for crypto risks.

What the latest evidence says

Several recent articles make the ‘crypto ↔ equity’ link very explicit:

• Global spillovers: Vuković (2025) uses a Bayesian Global VAR to show that adverse shocks originating in the cryptocurrency market are depressing stock markets, bond indices, exchange rates and volatility indices in a large number of countries – not just the US.
• Equity-crypto co-movement: Ghorbel and co-authors (2024) study the connection between major cryptocurrencies, G7 stock indices and gold. They find that cryptocurrencies have become important senders and receivers of shocks, with stronger links to equities in recent years and especially during turbulent periods.
• US and Chinese stock markets: Laminate et al (2024) investigate the spillovers between US and Chinese stocks, cryptocurrencies and gold. They find that there are significant dynamic risk spillovers from crypto to these equity markets, again concentrated in periods of high volatility.
• Contamination at fair level: Sajeev et al (2022) document a contagion effect of Bitcoin on major stock exchanges (NSE India, Shanghai, London and Dow Jones), using volatility spillover and correlation analysis from 2017-2021.

International organizations tell a similar story. An IMF department article on “Spillovers Between Crypto and Equity Markets” shows that Bitcoin shocks can explain a non-trivial share (around mid-teens) of the variation in global equity volatility, and that this influence has amplified over time as institutional and derivatives markets matured.

The overall conclusion: crypto is now firmly embedded in the global risk ecosystem.

Why technology and crypto are now moving together

Why does Bitcoin now look so much like a high-beta technology stock?

• Duration and interest rate sensitivity: Both crypto and growth stocks are essentially claims on uncertain future cash flows or network value. When real interest rates rise, the discount factors intervene hard – and both sectors sell together.
• Investor base and leverage: Retail trading, momentum strategies and derivatives are used extensively in both arenas. Products like futures, options and leveraged ETFs allow shocks to be magnified in one market and replicated in another.
• Institutional portfolio construction: As crypto is added to multi-asset and hedge fund portfolios, its returns inevitably become intertwined with traditional cross-asset positioning. When funds reduce risk, everything in the ‘risky bucket’ goes out together.

What this means for portfolios and risk management

For portfolio construction, the message is uncomfortable but clear:

• Crypto diversifies in quiet periods – correlations can still be modest in benign regimes.
• But during stress, when diversification is most valuable, correlations and spillovers increase.
• Bitcoin and major altcoins are behaving less like “digital gold” and more like leveraged proxies for global risk sentiment.

That doesn’t make crypto useless as an investment, but it does mean that based on the data, it is no longer defensible to consider a 5 to 10% crypto allocation as “uncorrelated upside.”

Going forward, an open question for both academics and practitioners is whether spot ETFs and broader institutional adoption will further strengthen these connections, or whether a new use case (such as the adoption of real payments or settlements) could create more idiosyncratic drivers again.

For now, the evidence points in one direction: when global markets catch a cold, crypto can no longer hold on – it coughs along with everything else.

Selected academic references

• Adelopo, I., et al. (2025). “The Interconnectedness between Cryptocurrencies and Financial Markets: An Overview.” Financial innovation. SpringerLink
• Frankovic, J. (2022). “On the Spillovers Between Cryptocurrency-Linked Stocks and Cryptocurrencies.” Global financial magazine54, 100719. https://doi.org/10.1016/j.gfj.2021.100719 IDEAS/RePEc
• Ghorbel, A., et al. (2024). “Connection between cryptocurrencies, gold and stock markets: a network approach.” European Journal of Management and Business Economics33(4), 466–489. Econstor
• IMF (2022). Spillovers between crypto and stock markets. IMF departmental document. IMF eLibrary IMF eLibrary+1
• Lamine, A., et al. (2024). “Spillovers among Cryptocurrencies, Gold, and Stock Markets.” Journal for Economics, Finance and Administrative Sciences29(57), 21–40. Emerald
• Liu, Y., and Tsyvinski, A. (2021). “Risks and Returns of Cryptocurrency.” Review of financial studies34(6), 2689–2727. https://doi.org/10.1093/rfs/hhaa113 OUP Academic
• Sajeev, KC, et al. (2022). “Contagion Effect of Cryptocurrency on the Securities Market.” Journal of Economic Studies49(7), 1390–1410. PubMed Central
• Umar, Z., Kenourgios, D., and Papathanasiou, S. (2021). “Connection between Cryptocurrency and Technology Sectors: Evidence from Implied Volatility Indices.” Financial inquiry letters38, 101492. ScienceDirect
• Vuković, DB, et al. (2025). “Spillovers between cryptocurrencies and financial markets.” Journal for International Money and Finance150, 102963. IDEAS/RePEc