Research on the Tail Risk Spillover Effect of Cryptocurrencies and Energy Market Based on Complex Network

As the relationship between cryptocurrency mining activities and electricity consumption becomes increasingly close, the risk spillover effect is steadily drawing a lot of attention to the energy and cryptocurrency markets. For the purpose of studying the risk contagion between the cryptocurrency and energy market, this paper constructs a risk contagion network between cryptocurrency and China's energy market using complex network methods. The tail risk spillover effects under various time and frequency domains were captured by the spillover index, which was assessed by the leptokurtic quantile vector autoregression (QVAR) model. Considering the spatial heterogeneity of energy companies, the spatial Durbin model was used to explore the impact mechanism of risk spillovers. The research showed that the framework of this paper more accurately reflects the tail risk spillover effect between China's energy market and cryptocurrency market under various shock scales, with the extreme state experiencing a much higher spillover effect than the normal state. Furthermore, this study found that the tail risk contagion between cryptocurrency and China's energy market exhibits notable dynamic variation and cyclical features, and the long-term risk spillover effect is primarily responsible for the total spillover. At the same time, the study found that the company with the most significant spillover effect does not necessarily have the largest company size, and other factors, such as geographical location and business composition, need to be considered. Moreover, there are spatial spillover effects among listed energy companies, and the connectedness between cryptocurrency and the energy market network generates an obvious impact on risk spillover effects. The research conclusions have an important role in preventing cross-contagion of risks between cryptocurrency and the energy market.