Hysteresis between Bitcoin, Gold, Oil, and the S&P 500 index: Evidence from a multi-threshold connectedness approach

The study analyses the presence of hysteresis in the volatility spillovers between Bitcoin, Gold, Oil, and the S&P 500 index, applying a novel multi-threshold connectedness framework. We decompose daily returns from January 2015 to May 2024, into three regimes, large positive changes (increasing), moderate changes (stable), and large negative changes (decreasing), which allowed capturing regime-dependent dynamics in intermarket connectedness. The final sample comprises 2,360 common daily observations after aligning trading days across markets. Our findings reveal robust evidence of hysteresis: connectedness intensifies during turbulent periods and does not symmetrically revert during tranquil periods. The S&P 500 index confirms its systemic role in global financial contagion by consistently emerging as a dominant shock transmitter across all regimes. Despite the common belief that Gold is a always a safe haven, the analysis showed that it exhibits a regime-dependent reversal in net positioning. Bitcoin is equally regime-sensitive, but its connectedness with the other assets is stronger during volatile episodes which emphasizes its increasing integration into mainstream finance. As opposed to contrary positions, oil turns out a predominant shock receiver, especially during turbulent periods. Further statistical tests uphold the hysteresis hypothesis as they confirm the differences in connectedness across regimes is significant. Compared to traditional quantile-based connectedness approaches, the multi-threshold approach suggested in this study offers better interpretability and computational efficiency in capturing asymmetric spillover connectedness. The study’s insights have practical potentials to improve dynamic portfolio allocation.