Assessing the Volatility Spillover of Crypto to Indian Stock Market

 Introduction

The price of Bitcoin has increased by around five times, from 20,000 USD in May 2020 to 1,00,000 USD in May 2025. However, the journey of Bitcoin's value was not smooth. Investing in Bitcoin remains a risky option as it is one of the most controversial financial assets, partly because the policymakers of any country still don't know how to incorporate crypto as part of their mainstream financial system.  With the rising popularity of crypto as an alternative to traditional investment instruments, especially among young investors, it is important to assess the effect of the crypto market's volatility on the Indian financial market. For an emerging market economy like India, assessing volatility spillover is difficult due to complexities in the interdependency of financial markets and the complexity of recent geopolitical scenarios.

The Russia-Ukraine war affected the international financial markets, and this is when the value of Bitcoin started falling. The value of Bitcoin recovered towards the end of 2023, mainly due to the fading effects of war. The increase in the price of Bitcoin during 2024 is a sign of investors' confidence in Bitcoin. During this time, other cryptocurrencies also gained in value, but the increase in the value of Bitcoin is very prominent. The victory of Donald Trump towards the end of 2024 and his association with Elon Musk, a well-known supporter of crypto (1), boosted the investors' confidence. As a result, the value of Bitcoin soared dramatically.

Movement of  Bitcoin price (in Dollars, High and Low) with important events (R code given below)

A simple multivariate GARCH model is used to determine whether the volatility in bitcoin's return affects the volatility of the India Nifty 50 after considering the effect of some of the important Asian Stock markets. The MGARCH models are generally used to understand how the conditional volatility of the dependent variables is affected by the conditional variance matrix of the independent variables. In Table 1, Model 1 gives the MGARCH result of the NIFTY-50 as the dependent variable and Bitcoin and other financial market returns as independent variables. We can see that the volatility of Nifty 50 is significantly and positively affected by the volatility of Bitcoin, at least for the time under consideration (January 2021 to May 2025.

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Result of Multivariate GARCH model

Conclusion :

This article investigated the impact of Bitcoin (BTC/USD) on Indian Stock market namely the NIFTY 50 using time series forecasting with GARCH model to examine volatility and spillover effects. The combined application of the GARCH model provided valuable insights into the volatility behavior and predictive potential across these financial instruments, highlighting the growing relevance of interdisciplinary approaches in financial analysis.
The analysis revealed that the NIFTY 50 exhibited a statistically significant relationship with Bitcoin. This finding suggests that the Indian equity market is more sensitive to cryptocurrency volatility, potentially due to factors like rising crypto adoption, speculative retail participation, and overlapping investor sentiment. India is also an emerging economy with a large number of investors who face no restrictions on Bitcoin investments, allowing for easy entry and exit. 

R Codes:

library(dplyr)

library(ggplot2)

library(lubridate)

install.packages("yahoofinancer")

library(yahoofinancer)

install.packages("gganimate")

library(gganimate)

install.packages("gifski")

library(gifski)

btc <- Ticker$new('BTC-USD')

btc_data <- btc$get_history(start = '2021-01-01', end = '2025-02-05', interval = '1d')

head(btc_data)

btc_data <- btc_data %>%

  mutate(date_only = as.Date(date))

btc_data <- btc_data %>%

  mutate(year = year(date_only))

btc_data$EventDate1 <- ifelse(seq(as.Date("2021-01-01"), as.Date("2025-02-05"), by = "day") %in% as.Date("2022-02-01"), "Russia-Ukraine War", NA)

btc_data$EventDate2 <- ifelse(seq(as.Date("2021-01-01"), as.Date("2025-02-05"), by = "day") %in% as.Date("2023-10-10"), "Recovery From War", NA)

btc_data$EventDate3 <- ifelse(seq(as.Date("2021-01-01"), as.Date("2025-02-05"), by = "day") %in% as.Date("2024-10-10"), "USA Election", NA)

p <- ggplot(btc_data)

p<-p+  geom_line(aes(x= date_only, y=high), color = "red", size = 0.5)

p<-p+  geom_line(aes(x= date_only, y=low), color = "blue", size = 0.5)

p<-p+ xlab("Date") + ylab("Bitcoin") + theme_minimal()+

  transition_reveal(date_only)

p<-p+ geom_vline(data = btc_data %>% filter(!is.na(EventDate1)),

             aes(xintercept = as.Date("2022-02-01")), 

             linetype = "dashed", color = "black", size = 1) +

  geom_text(data = btc_data %>% filter(!is.na(EventDate1)),

            aes(x = as.Date("2022-02-01"), y = max(high, na.rm = TRUE), label = "Russia-Ukraine War"), 

            color = "black", size = 2.7, vjust = -12)

p<-p+ geom_vline(data = btc_data %>% filter(!is.na(EventDate2)),

             aes(xintercept = as.Date("2023-10-10")), 

             linetype = "dashed", color = "black", size = 1) +

  geom_text(data = btc_data %>% filter(!is.na(EventDate2)),

            aes(x = as.Date("2023-10-10"), y = max(high, na.rm = TRUE), label = "Recovery From War"), 

            color = "black", size = 2.7, vjust = -8)

p<-p+ geom_vline(data = btc_data %>% filter(!is.na(EventDate3)),

             aes(xintercept = as.Date("2024-10-10")), 

             linetype = "dashed", color = "black", size = 1) +

  geom_text(data = btc_data %>% filter(!is.na(EventDate3)),

            aes(x = as.Date("2024-10-10"), y = max(high, na.rm = TRUE), label = "USA Election"), 

            color = "black", size = 2.7, vjust = -8)

animate(p, nframes = 230, fps = 8, width = 1600, height = 1000, res = 220, renderer = gifski_renderer("pic1.gif"),loop='FALSE')

References:

1) Elon Musk may have a revolutionary crypto plan. Here's what we know about 'X-Money' - The Economic Times

2)Khalfaoui, R., Hammoudeh, S., & Rehman, M. Z. (2023). Spillovers and connectedness among BRICS stock markets, cryptocurrencies, and uncertainty: Evidence from the quantile vector autoregression network. Emerging Markets Review, 54, 101002.

3) Zeng, H., & Ahmed, A. D. (2023). Market integration and volatility spillover across major East Asian stock and Bitcoin markets: an empirical assessment. International Journal of Managerial Finance, 19(4), 772-802.

By
Aryamaan Kain,
M.A. Economics (2023-25), Department of Economics, SBSS, Manav Rachna International Institue of Research and Studies, Faridabad.
To cite this article: 
Aryamaan. (2025, May). Assessing the volatility spillover of crypto to Indian stock market. Eco-Bizz blog, Department of Economics.
https://ecobizzblog.blogspot.com/2025/05/assessing-volatility-spillover-of.html

Movie Review "The Great Debaters": Through the Lens of Human Development

 Introduction:

The objective of the government or a social planner is to eliminate all existing unfreedoms in society to enhance the capabilities of the people. However, we often observe that policies are designed to fulfill the objectives of political parties, while the adverse consequences of such policies disproportionately affect the poor. One example of such a policy is the Jim Crow law, which prevailed in the United States (mainly in the South) from 1870 to 1965. Aimed at providing equal opportunity for the African-American community in a segregated manner, this law created numerous distortions and marked the birth of racial discrimination in the United States. The separation of all public facilities, such as education, health, housing, and transportation, worsened the situation for colored individuals. Another threat to African-American people was lynching, a death sentence imposed on an alleged colored person by a white mob without any legal jurisdiction. The Great Debaters (2007), directed by Denzel Washington, is the story of a visionary African-American professor who believes education is the only way out of the darkness. He enhanced the debating skills of a few students, who later became leaders and played an important role in abolishing such policies.

Source: IMDb, IMDb rating of 7.5 

Plot:

The Great Debaters is based on the drawbacks of Jim Crow laws and highlights the situation of African Americans during the 1930s. Melvin B. Tolson (Denzel Washington), a professor at Wiley College, uses debating to enhance the abilities of the four colored students who make up the college's debate team. After defeating other similar community colleges and universities, they earned the opportunity to debate against a white people dominating institution, Oklahoma City University, tackling the topic of “Negroes should be admitted to state university” (Jim Crow law) and ultimately overcoming their opponent. They also make history by defeating Harvard University without Mr. Tolson's assistance, showcasing their improved skills and capability to challenge an unjust system. The use of powerful statements like “An unjust Law is no law at all,” “Negroes people are not just another color in the American fabric, they are the thread that holds it all together..”, "the time for justice, the time for freedom, the time for equality is always RIGHT NOW.." and so on make the movie very inspirational. Education, the power of logic, and debate empowered these students to forge their own identities.

Critical view:

The African Americans were used as slaves until 1865 when the thirteenth amendment to the United States Constitution was passed. The concept was “keep the body, take the mind.” They were the most vulnerable, with little access to education, health, wealth, and political power. The political group, composed of landlords and economically influential individuals, primarily white, implemented the Jim Crow law. This allowed them to maintain the status of colored people as before and gain from it economically and politically. These laws created unfreedom and lowered the capabilities of the most vulnerable people in society. Mr. Tolson uses the power of words to shape his students and endow them with the weapon of reasoning. This increases the capability of these students, who are the future of society. In the present scenario, African Americans' educational attainment helped them establish a respectable position in American culture. The use of logical statements and arguments makes the movie unique. The film highlights the role of public debate and education among the poor in building a well-structured society. A logically well-structured discussion can help secure our rights, enhancing our capacity and society.

Human development prospects:

The movie is not just about the debate team of a community college (African American) but also about the suffering of these people who have significantly endured due to the government's flawed policies. Additionally, the film illustrates the violation of various Rawls'  principles of Justice.

(1) The discrimination against colored people is a violation of human rights, and it also widens the social gapes. The segregated education, health, and other social services lead to a lower quality of education, and the health of African Americans is against the fundamental rights of the citizens of a country. It violates the Rawlsian principle of “free and equal citizen.”

(2) The movie also depicts the injustices against a specific section of people. Lynching an alleged person without any legal process just because he is colored is evidence of the unjustness of contemporary society. Both 1 and 2 led to a violation of the “first principle of justice,” which states that;

“Each person has the same indefeasible claim to a fully adequate scheme of equal basic liberties, which scheme is compatible with the same scheme of liberties for all…” (p.g. 42, Rawls, 2001)

(3) These discriminating policies, which are the huddles in the development path of African American people, are implemented by white people who have both political and economic power. The loopholes and the lack of proper scrutiny of these policies lead to widespread suffering and humiliation. This is a violation of the “second principle of justice,” which states that;

“…Social and economic inequalities are to satisfy two conditions; first, they are to be attached to offices and positions open to all under conditions of fair equality of opportunity; and second, they are to be to the greater benefit of the least advantaged member of society.” (p.g. 42, Rawls, 2001)

The critical message that the movie conveys is the importance of education and debate. One logical conclusion is that if a policy lacks counter-debate, it may become unjust. However, if the policy undergoes proper debate and counter-debate, it will enhance the capability of the people and society's welfare. The movie focuses on the role of education and discussion in building the capability of the poor and backward sections.

References:

[1] Rawls, J (2001) Justice as Fairness: A Restatement, The Belknap Press

[2] Sen, Amartya (1999) Development as Freedom, Oxford University Press, Delhi

[3] Sen, Amartya (1985) Commodities and Capabilities, Oxford University Press, Delhi

Web sites:

[4] http://www.jimcrowhistory.org/history/creating2.htm

[5] http://www.jimcrowhistory.org/resources/lessonplans/hs_es_passing_for_white.htm

[6] http://en.wikipedia.org/wiki/Lynching_in_the_United_States

BY

Dr. Akash Kumar Baikar

Assistant Professor 

DoE, SBSS, MRIIRS