Crypto-contagion and capital flows: Interconnectedness across emerging and traditional cryptocurrencies, ethical equities, and regional markets

By adopting a dual-layered approach that examines both category-level and asset-level dynamics, this study offers fresh insights into how the maturity and moral alignment of cryptocurrencies shape financial contagion, diversification potential, and systemic risk across global markets. We investigate the dynamic interconnectedness among traditional and emerging cryptocurrencies, sin stocks, and socially responsible equities, employing a Time-Varying Parameter Vector Autoregressive (TVP-VAR) model to capture evolving return spillovers across asset classes and regions. Our analysis reveals that traditional cryptocurrencies, particularly BTC, act as dominant net transmitters of shocks to both vice- and virtue-aligned equities. Emerging tokens such as TRUMP also exert significant influence as net transmitter, whereas Pi Coin consistently functions as a net receiver, suggesting lower systemic risk. For ethical investors, TRUMP, as a strong net transmitter, may raise concerns because, although such tokens can offer short-term gains and volatility-based opportunities, they may not align with socially responsible investment goals due to their speculative and politically charged nature. Regional analyses indicate stronger crypto-equity contagion in North America and Latin America, with notably weaker linkages in South Asia and Sub-Saharan Africa. These findings challenge the presumed neutrality of digital assets and offer actionable insights for portfolio reallocation, ethical investing, and regulatory oversight. Our study contributes to the growing discourse on moral finance by revealing the reputational and systemic spillovers embedded in crypto-asset markets.