Abstract This study explores the higher-order moments of connectedness among cryptocurrency, commodity, bond, and stock markets from April 19, 2017, to December 29, 2023, on the basis of the GARCH-SK and TVP-VAR models. The findings reveal that Bitcoin and Ethereum act as significant net shock transmitters, especially during major events such as the COVID-19 pandemic and the Russia–Ukraine conflict. After mid-2021, these cryptocurrencies transitioned from net receivers to net transmitters of volatility owing to rising economic and geopolitical risks. These insights assist in portfolio diversification strategies. By combining shock transmitters with shock-resilient cryptocurrencies, investors can enhance their risk profiles. Diversification opportunities shift during financial crises, making it crucial to focus on shock transmitters, which are less influenced by various risk factors. Additionally, the study highlights cryptocurrencies as potential safe havens compared with traditional assets such as gold, bonds, and stocks, which often maintain or appreciate value during market stress. TVP-VAR-informed dynamic portfolio reallocation can improve risk-adjusted returns and lower volatility, aiding in capital preservation during high TCI periods. Overall, our findings suggest that portfolios that include cryptocurrencies generally outperform those that do not, emphasizing their role as effective diversifiers in portfolio optimization and financial stability.
Güleç et al. (Fri,) studied this question.